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Whatsapp Workers install photovoltaic solar panels on the roof of a US department store.

Solar and renewables are being touted as the energy sources of the future, but will they provide enough power relative to the energy that must be invested in them? Engineer Graham Palmer argues there’s no easy solution to the fact that we’re running out of fossil fuels.

Canadian philosopher Marshall McLuhan once quipped that the last thing a fish would notice is the water. You could almost draw a parallel to the essential role energy plays in modern society—cheap accessible energy is now so ubiquitous that we barely notice the importance of it to modern living, nor the astonishing wealth it has brought. Just one litre of petrol provides the equivalent of a week or more of pre-industrial human labour. Having achieved this miraculous transformation, it is not likely that societies will voluntarily turn back. According to Joseph Tainter’s thesis, societies grow more complex in order to solve new social and environmental problems. And in order to coordinate this additional complexity, societies need more energy.

Neoclassical economists, however, assume that only labour and capital are important for growth—energy supply is assumed to be unconstrained since natural resources are a small proportion of national accounts. Indeed, the energy forecasts produced by the International Energy Agency and the IMF are computed from GDP forecasts.

It’s not at all obvious that solar provides the same value to society as oil and other energy sources; every one of the more than a million grid-connected PV systems in Australia could be turned off for a week and few would notice.

While neoclassical economics is interested in the functioning of market economies, ecological economics is grounded in the laws of thermodynamics, and takes the perspective that vast energy flows since the birth of the industrial revolution have been integral to economic development. Importantly, it takes energy and capital to drill oil wells, build power stations and erect wind turbines. The ratio of the useful energy produced relative to the energy invested to get that energy is known as the energy-return-on-investment, EROI, or sometimes ‘net energy’. It is the energy surpluses fossil fuels make available that have enabled the development of the modern state, with its advanced education, healthcare, welfare, and the richness and diversity of modern life.

But what if global net energy is on a downward trend? The EROI of the global oil supply is currently taken at between 10:1 and 18:1, and declining. Capital investment for the oil industry has tripled in the past 10 years, but production has plateaued. Oil supply is increasingly reliant on deepwater drilling, enhanced recovery and unconventional oil.

If we take the commonly quoted net energy figures for solar of somewhere between 10:1 up to 60:1—and still increasing—we might assume that PV (photovoltaic solar) is an irresistible ‘disruptive technology’ on an assured upward trajectory. However, it’s not at all obvious that solar provides the same value to society as oil and other energy sources; every one of the more than a million grid-connected PV systems in Australia could be turned off for a week and few would notice, nor would the electricity system reserve margins be adversely affected. Yet even minor disruptions to petrol supplies, natural gas or the internet can have a major effect on daily life. The curious thing is that the literature on the solar life cycle seems to readily accept these high numbers without probing what they really mean.

Read more: Renewable energy finally makes economic sense

It is only recently that these figures have been put into a real world context. One of the foremost experts on the net energy concept, Charles Hall, and solar engineer Pedro Prieto conducted a comprehensive study of the large-scale deployment of solar in Spain. Coincidentally, I was researching a paper on solar in Australia, which was published shortly after. Prieto and Hall's study was a bottom-up microeconomic analysis, while mine was an assessment of system costs and intermittency. Both of us came to similar conclusions on solar’s net energy; that it is between 2:1 and 3:1, much less than the most commonly cited figures and below the critical minimum threshold needed to sustain a complex society.

At the heart of the net energy issue are the guidelines established by the International Energy Agency’s solar program. The guidelines establish a consistent framework for life cycle analyses, but the results that are intended for comparing solar systems are being used to compare solar with other energy sources, leading to a gross overestimation of their true value to society.

Nonetheless, intermittent sources of power can still play a useful role in fuel savings, pollution control and emissions abatement, but at a cost. The real questions are what the precise role of solar is, what it contributes to society, and what value do we put on it.

To draw an analogy—if we wanted to compare the cost of car ownership versus riding a bike, we could compare purchase price, per kilometre running cost and even total system costs, including congestion. Clearly the bike would be much cheaper on nearly all measures. But most people will quickly spot the fallacy: even if you buy a bike to ride to work occasionally, the average commuter still needs a car—the bike supplements rather than replaces the car.

Similarly, it’s clear that solar adds to the energy mix without replacing conventional generation. Germany has seen a 32 per cent net increase in capacity over the past decade, most of it in wind and solar, but consumption has barely changed. Despite wind and solar contributing a greater share, we are also seeing an upward trend in coal-fired generation due to the dynamics of the energy and carbon markets. As the reluctant hegemon of Europe, Germany has far more discretion than most to implement its pioneering energy experiment, the Energiewende, which has committed them to a disruptive technological pathway. However, despite strong political, social and economic support since the 1990s, greenhouse intensity for electricity remains stubbornly high at 10 to 20 times the best performing European nations.

Related: Is the carbon tax to blame for high electricity prices?

Lacking the hegemonic discretion of Germany, Spain has issued 17 Royal Decrees to unwind their solar bonanza. These painful and unpopular legislative amendments are being called ‘taxes on the sun’. However, unlike other industrial transitions, such as coal, steam or railways that were able to bootstrap their own productivity gains to deliver increased national wealth, the Spanish solar revolution has proved a net burden on an already struggling economy.

This macroeconomic outcome is consistent with a low net energy, and aligns with Prieto and Hall’s case study. It’s important to recognize that when we buy electricity, we are really buying access to the grid and the associated reliability. This is a legacy of historically state-run electricity, when there was an informal social contract that those who used the most energy paid the most, even though utility infrastructure costs are mostly reflective of reliably meeting peak demand. Debates over the trade-offs between demand reflective pricing and average cost pricing date back to the 1940s and were eventually settled in favour of flat energy tariffs, which are still used today. The problem is that solar is supplying energy but contributing no reliability, hence flipping the traditional socialised model and ‘gaming’ the system. In Spain, as in Australia, there is no easy remedy to tariff reform, since any change will bring winners and losers.

The outcomes that we see in Germany and Spain—a growth in energy costs as a proportion of GDP, and declining electricity supply productivity—can also be caused by a peakier load curve due to the use of air conditioners, and overinvestment in electricity networks, both of which we have been seen in Australia in recent years. These outcomes provide a clue as to what we should expect with declining net energy.

On the other hand, there are some contexts where solar can make sense. For example, with around four hours of built-in storage, solar could provide a valuable network support role because Australian air conditioning loads roughly coincide with solar output.

However, from a global perspective, the idea that advances in energy storage will enable solar to take on a primary energy role is enticing, but misleading. Similarly, it is often assumed that solar can be incorporated into a ‘suite of renewables’ with smart grids and electric vehicles to achieve some sort of ‘optimised synergy’, but the reality is that this imagined synergy rarely exists. As John Morgan observes, the catch-22 is that in overcoming intermittency by adding storage, the net energy is reduced below the level required to sustain our present civilization.

While much attention has been devoted to facilitating the growth of intermittent power, arguably the more pressing challenge is coming to terms with a decline in the net energy of global energy supply chains, and rising demand in the developing world. Energy supply is highly correlated with human development, and one in four people globally still lack access to the most basic of energy services. A few solar panels provided by foreign aid to remote villages can make a great difference to people’s lives. But a modern urbanised society with schools and hospitals, roads and bridges, sewage and clean water needs a self-supporting energy system based on dispatchable energy with a sufficiently high net energy.

So, what of the future? Net energy is important because it is a foundational issue that underpins energy economics. Indeed, in a review of long-term trends in net energy, debt, and interest rates in the UK and United States, Carey King concluded that we may already be at a fundamental turning point in the history of cheap energy. This will have implications for the assumptions of economic and social development and long-run quality of life indicators. A wider appreciation of these issues is sorely needed.

Ockham’s Razor is a soap box for all things scientific, with short talks about research, industry and policy from people with something thoughtful to say about science.