Ideasroom

Energy makes the economy go round

Dr Mike Joy tackles some disturbing truths about our reliance on oil, suggesting how we might transition to a 'de-carbonised world'

How many barrels of oil does it take to power the economy? Far from the punchline of a joke, the answer outlined by Dr Mike Joy, a senior researcher at Victoria University of Wellington’s Institute for Governance and Policy Studies, in a public lecture highlights some disturbing truths about our reliance on oil, the importance of energy to the economy, and how we might “transition to a de-carbonised world”.

Starting with the dire warning from more than 20,000 scientists worldwide that “if the world doesn’t act soon, there will be catastrophic biodiversity loss and untold amounts of human misery”, Joy went on to introduce the field of Biophysical Economics and one of its key concepts—Energy return on energy invested (EROI), or “how much energy do you have to put in to get that back?”.

“Biophysical Economics uses material and energy flows, rather than prices, to evaluate the economy, and it’s clear economists have underestimated the significance of energy in production. People also seem to underestimate how hard it is to replace energy production and how much it takes to produce energy,” said Joy.

“They don’t realise most of the food that is produced for people on this planet comes from using fossil fuels. But the net energy from our oil and gas supply is declining, which is going to have implications for everyone.”

There is a “double whammy” of the current need to use fossil fuels continuing to expand globally, and the fact that the easily accessible fuel is gone and what is left requires much more effort and therefore energy and capital to extract and refine.

We need to find four Saudi Arabias in the next 20 years to keep up with consumption.

Guest speaker at the lecture and a transition engineering consultant, Nathan Surendran put this assessment in perspective by pointing out that “we’re now producing and consuming two to four barrels of oil for each barrel we find”.

“Put another way, we need to find four Saudi Arabias in the next 20 years to keep up with consumption. The reality is that oil is the weak link in the production and delivery of virtually all other forms of energy, commodities, food, goods and services. Oil is, in many respects, the master resource,” Surendran said.

In spite of acknowledging the importance of oil to economies, both Joy and Surendran are in agreement about the need for New Zealand and the world to be carbon neutral by 2050 to keep global temperature rise under 1.5°C.

So what about the promise of renewable energy in achieving this goal?

While many people may think a transition to renewable energy will be a “lovely carry-on-as-we-are world with no more petrol pumps”, Joy is sceptical about the “bright green future we’re being told awaits us”.

“Contrary to what most people believe, we are using proportionally less renewable energy than we did previously. That is a huge issue. But there’s also the fact that the EROI on renewables like photovoltaic (solar panels), wind and biofuels poor and can’t sustain our current energy needs,” said Joy.

“The best way to compare all the possible energy sources and realise limitations on that green future, is by looking at these renewable energy sources in terms of watts per square metre—how much area of land does it take for each renewable energy source to meet current energy demand.”

Applying the formula of energy used per person and population density, Joy used the example of Britain to highlight the issue of relying solely on current renewable energy sources, as every square metre of the country would need to be covered in wind farms and solar panels to meet energy needs.

“The energy density of our alternatives is so much lower than fossil fuels, but if we want to keep under the 1.5oC threshold, we have to reduce our emissions by 6 percent per year from today,” said Joy.

“Basically we’re going to have to get used to having a whole lot less energy than what we had before, and that’s our only future. We have to figure out how we’re going to do that.”