It’s Not Just Alternative Energy Versus Fossil Fuels or Nuclear – Energy Has to Become DECENTRALIZED

Proponents for oil, gas, nuclear and coal claim that we must expand these risky and oftentimes deadly types of energy production, or we will shiver in the dark like cavemen.

Proponents of alternative forms of energy say we should switch over to cleaner fuels to avoid a parade of horribles … and point to the Gulf oil spill, the Japanese nuclear crisis and the destruction of aquifers with natural gas fracking as examples. Defenders of fossil fuels and nuclear rebut this by saying that alternative energy isn’t ready for prime time yet.

Who’s right?

As I’ll show below, the question is not as simple as it may sound.

Return on Investment

As Thomas Homer-Dixon, director of the Trudeau Center for Peace and Conflict Studies at the University of Toronto, notes:

A better measure of the cost of oil, or any energy source, is the amount of energy required to produce it. Just as we evaluate a financial investment by comparing the size of the return with the size of the original expenditure, we can evaluate any project that generates energy by dividing the amount of energy the project produces by the amount it consumes.

Economists and physicists call this quantity the “energy return on investment” or E.R.O.I. For a modern coal mine, for instance, we divide the useful energy in the coal that the mine produces by the total of all the energy needed to dig the coal from the ground and prepare it for burning – including the energy in the diesel fuel that powers the jackhammers, shovels and off-road dump trucks, the energy in the electricity that runs the machines that crush and sort the coal, as well as all the energy needed to build and maintain these machines.

As the average E.R.O.I. of an economy’s energy sources drops toward 1 to 1, an ever-larger fraction of the economy’s wealth must go to finding and producing energy. This means less wealth is left over for everything else that needs to be done, from building houses to moving around information to educating children. The energy return on investment for conventional oil, which provides about 40 percent of the world’s commercial energy and more than 95 percent of America’s transportation energy, has been falling for decades. The trend is most advanced in United States production, where petroleum resources have been exploited the longest and drillers have been forced to look for ever-smaller and ever-deeper pools of oil.

Cutler Cleveland, an energy scientist at Boston University who helped developed the concept of E.R.O.I. two decades ago, calculates that from the early 1970s to today the return on investment of oil and natural gas extraction in the United States fell from about 25 to 1 to about 15 to 1.

This basic trend can be seen around the globe with many energy sources. We’ve most likely already found and tapped the biggest, most accessible and highest-E.R.O.I. oil and gas fields, just as we’ve already exploited the best rivers for hydropower. Now, as we’re extracting new oil and gas in more extreme environments – in deep water far offshore, for example – and as we’re turning to energy alternatives like nuclear power and converting tar sands to gasoline, we’re spending steadily more energy to get energy.

For example, the tar sands of Alberta, likely to be a prime energy source for the United States in the future, have an E.R.O.I. of around 4 to 1, because a huge amount of energy (mainly from natural gas) is needed to convert the sands’ raw bitumen into useable oil.

Professor Charles Hall of the SUNY College of Environmental Science and Forestry provides the following graphic to illustrate the point:

“Balloon graph” representing quality (y graph) and quantity (x graph) of the United States economy for various fuels at various times. Arrows connect fuels from various times (i.e. domestic oil in 1930, 1970, 2005), and the size of the “balloon” represents part
of the uncertainty associated with EROI estimates.

(Source: US EIA, Cutler Cleveland and C. Hall’s own EROI work in preparation)Click to Enlarge.

(click for larger image.)

The take away message from the graph is that the energy return on investment was very high for oil in 1930, but it is very low today, since the cheap, easy-to-get-to (and less dangerous) oil is gone.

But what about alternative energies? Professor Hall writes:

The EROI for wind turbines compares favorably with other power generation systems (Figure 3). Baseload coal-fired power generation has an EROI between 5 and 10:1. Nuclear power is probably no greater than 5:1, although there is considerable debate regarding how to calculate its EROI. The EROI for hydropower probably exceed 10, but in most places in the world the most favorable sites have been developed.

Figure 3: EROI of various electric power generators.

(“PV” stands for photovoltaic – i.e. direct solar power.) Solar thermal has a much lower EROI, although Hall notes elsewhere:

Because passive solar design is incredibly site specific it is very difficult to determine just what the EROI might be. Rarely does an architect get quantitative feedback on the system, finding a numerical Energy Return on Investment (EROI) is nearly impossible.(Lyng 2006, Spanos 2005). Nevertheless if various passive solar designs are built into the house from the beginning then fairly large energy gains can be obtained with little or no investments. In other words it may cost little to put most of the windows on the south side, although that may greatly increase the gain.

An EROI could be calculated for a case specific location by dividing the energy saved each year over the energy inputted to make that house passive solar. The EROI for a passive solar would be very high because building passive solar is a one time expense and houses last half a century or more. Studies have shown that the energy savings can range anywhere from 30-70%, this would cause the EROI to change vastly from case to case. If the payback period is five years and the house lasts for 50 then the EROI would be, apparently, 10:1.

So what does this mean? Comparing Professor Hall’s two graphs, we can see that virtually all forms of alternative energy – wind, geothermal, photovoltaic, and hydro – have greater or equal EROI than fossil fuels and nuclear. Passive solar might be lower, unless it is incorporated into original building construction.

However, Professor Hall’s figures were generated in 2006. All forms of alternative energy have become more efficient since 2006.

But – as we’ll see below – it’s not just a question of fossil fuels and nuclear versus alternative energy. It’s also a question of centralization versus decentralization.

The U.S. Wastes More Energy Than it Uses – Partly Because of the Centralization of Power

As shown by the following graphic from Lawrence Berkeley National Laboratory, the U.S. wastes a lot more energy than it uses:

(click for giant graphic.)

America uses 39.97 quads of energy, while it wastes 54.64 quads (i.e. “rejected energy”).

As CNET noted in 2007:

Sixty-two percent of the energy consumed in America today is lost through transmission and general inefficiency. In other words, it doesn’t go toward running your car or keeping your lights on.

Put another way:

  • We waste 650% more energy than all of our nuclear power plants produce
  • We waste 280% more energy than we produce by coal
  • We waste 235% more energy than we produce by natural gas (using deadly fracking)
  • We waste 150% more energy than we generate with other petroleum products

The Department of Energy notes:

Only about 15% of the energy from the fuel you put in your tank gets used to move your car down the road or run useful accessories, such as air conditioning. The rest of the energy is lost to engine and driveline inefficiencies and idling. Therefore, the potential to improve fuel efficiency with advanced technologies is enormous.

According to the DOE, California lost 6.8% of the total amount of electricity used in the state in 2008 through transmission line inefficiencies and losses.

The National Academies Press notes:

By the time energy is delivered to us in a usable form, it has typically undergone several conversions. Every time energy changes forms, some portion is “lost.” It doesn’t disappear, of course. In nature, energy is always conserved. That is, there is exactly as much of it around after something happens as there was before. But with each change, some amount of the original energy turns into forms we don’t want or can’t use, typically as so-called waste heat that is so diffuse it can’t be captured.

Reducing the amount lost – also known as increasing efficiency – is as important to our energy future as finding new sources because gigantic amounts of energy are lost every minute of every day in conversions. Electricity is a good example. By the time the energy content of electric power reaches the end user, it has taken many forms. Most commonly, the process begins when coal is burned in a power station. The chemical energy stored in the coal is liberated in combustion, generating heat that is used to produce steam. The steam turns a turbine, and that mechanical energy is used to turn a generator to produce the electricity.

In the process, the original energy has taken on a series of four different identities and experienced four conversion losses. A typical coal-fired electrical plant might be 38% efficient, so a little more than one-third of the chemical energy content of the fuel is ultimately converted to usable electricity. In other words, as much as 62% of the original energy fails to find its way to the electrical grid. Once electricity leaves the plant, further losses occur during delivery. Finally, it reaches an incandescent lightbulb where it heats a thin wire filament until the metal glows, wasting still more energy as heat. The resulting light contains only about 2% of the energy content of the coal used to produce it. Swap that bulb for a compact fluorescent and the efficiency rises to around 5% – better, but still a small fraction of the original.

Example of energy lost during conversion and transmission.

Example of energy lost during conversion and transmission. Imagine that the coal needed to illuminate an incandescent light bulb contains 100 units of energy when it enters the power plant. Only two units of that energy eventually light the bulb. The remaining 98 units are lost along the way, primarily as heat.

Moreover, many appliances use energy even when they are turned off. As Cornell University noted in 2002:

The typical American home has 20 electrical appliances that bleed consumers of money. That’s because the appliances continue to suck electricity even when they’re off, says a Cornell University energy expert. His studies estimate that these so-called “vampire” appliances cost consumers $3 billion a year — or about $200 per household.


“As a result, we’re using the equivalent of seven electrical generating plants just to supply the amount of electricity needed to support the standby power of our vampire appliances when they’re off.”


Worldwide, standby power consumes an average of 7 percent of a home’s total electricity bill, although that figure is as much as 25 percent in some homes. In Australia, standby power accounts for 13 percent of total energy use; in Japan it accounts for 12 percent; and in the United States, 5 percent.

Increasing the efficiency of appliances would cut standby power consumption by about 72 percent, according to a recent study by the International Energy Agency in France.

(Lawrence Berkeley National Lab provides data on the standby power drawn by different appliances.)

We can’t prevent all of the loss of energy from energy production, transmission or usage. As the National Academies Press puts it:

Efficiencies of heat engines can be improved further, but only to a degree. Principles of physics place upper limits on how efficient they can be.

But we can prevent a lot of energy loss. For example, the Rocky Mountain Institute estimates that we could reduce energy use by a third:

Massive inefficiencies across the US’s energy network can be eliminated relatively easily, cutting about a third off the nation’s energy use, according to a major new analysis of power consumption.

The study from environmental think tank the Rocky Mountain Institute (RMI), entitled Assessing the Electric Productivity Gap and the US Efficiency Opportunity, argues that wholescale efficiency improvements could be in place by 2020 ….


If the rest of the country achieved the electric productivity already attained by the top-performing states, the country would save a total of 1.2m gigawatt-hours annually – equivalent to 30 per cent of the nation’s annual electricity use or 62 per cent of US coal-fired electrical power.


“In 2020, if the US can, on average, achieve the electric productivity of the top-performing states today, we can anticipate a 34 per cent reduction in projected electricity demand,” he said.

How do we increase energy efficiency and reduce loss?

Sure, we could talk about energy efficient appliances and cars, and providing smarter systems – such as using power controlling devices which make sure that only the amount of power each device requires each moment is delivered.

But the bigger picture is decentralizing power generation and transmission.

As the Rocky Mountain Institute writes:

Often the cheapest, and most reliable, distributed power is the power produced at or near the customer. Distributed energy — often called micropower — refers to a variety of small, self-contained energy sources located near the final point of energy consumption.

This is in contrast to a more traditional system, where power is generated by a remotely-located, large-scale plant and electricity is sent down power lines to the consumer — often over vast distances.

RMI’s extensive research (culminating in “Small is Profitable,” the Economist’s 2002 Book of Year) on distributed energy resources found that properly considering the economic benefits of ‘distributed’ (decentralized) electrical resources typically raises their value by improving system planning, construction, operation and service quality.

Centralized electricity systems with giant power plants are becoming obsolete. In their place are emerging “distributed resources” — smaller, decentralized electricity supply sources (including efficiency) that are cheaper, cleaner, less risky, more flexible, and quicker to deploy.


Electricity production at or near the point of use can greatly improve efficiency and reduce the costs and energy losses associated with the national grid while increasing security and reliability.

Micro or distributed power (also called “micro generation”) can take the form of local solar, wind power, hydro, geothermal … or even making alcohol out of stale donuts to run your car. See this, this and this.

Indeed, even nuclear power can be generated and then used locally at the neighborhood scale – and a lot safer than Tepco or GE can do it in a giant nuclear plant.

Power can also be captured from excess heat energy. As I’ve previously noted:

Heat can be used to generate electricity. This is true not only on the industrial scale, but even on the level of your home faucet. Indeed, inventors have already built home faucet kits which turn the unused heat from your hot water into electricity.

In hot climates, black thermal-electric mats could be installed on roofs to generate electricity.

Heat is a byproduct of other processes, and so nothing special needs to be done to create it. Just about every human activity and many natural processes create heat, so we just have to utilize it.

A dramatic example of wasted heat energy is the Oak Creek coal-fired power plant in Wisconsin. The two units at Oak Creek suck up two billion gallons of water from Lake Michigan each day, and pipe it back into lake 10-15 degrees warmer. All of that heat energy is wasted.

I’ve also noted that there might be a lot of untapped “stomp” energy:

Another use of a free, wasted byproduct to generate electricity is piezo-electric energy. “Piezo” means pressure. Anything that produces pressure can produce energy.

For example, a train station in Japan installed piezo-electric equipment in the ground, so that the foot traffic of those walking through the train station generates electricity (turnstiles at train, subway and ferry stations, ballparks and amusement parks can also generate electricity).

Similarly, all exercise machines at the gym or at home can be hooked up to produce electricity.

But perhaps the greatest untapped sources of piezo-electric energy are freeways and busy roads. If piezo-electric mats were installed under the busiest sections [a little ways under the surface], the thousands of tons of vehicles passing over each day would generate massive amounts of electricity for the city’s use.

As Ken Alex – director of California Governor’s Office of Planning and Researchnotes:

One possible way to reduce the need for transmission lines has received little attention until lately. “Distributed solar” is the term for solar PV projects in and around population areas that feed directly into existing transmission…. Rooftop solar is part of that mix, potentially providing more than 40,000 MW to the system (from commercial and residential roofs). That’s about 2/3 of California’s power needs, although it’s not likely we will get close to 100% of what is available. Ground mounted solar PV projects of up to 20 MW each could provide much more, by some estimates many tens of thousands of MW. Modest-sized systems could be sited at utility right of ways, along highways, on the outskirts of some urban areas, even along the California aqueduct.


Distributed solar is not a panacea, but it could provide a much more significant percentage of renewable power for the state than currently contemplated, and it could happen quickly.

Alex also points out:

“Distributed storage” could become a significant contributor. Many sources of renewable power, such as wind and solar, are intermittent; they are not necessarily available when customers need power. And electricity is notoriously difficult to store. That’s a big reason why California has a lot of “peakers” – expensive, often highly polluting, high CO2 generating power plants that run only during peak demand, usually in the late afternoon on hot summer days. If we can’t efficiently store power for peak demand periods, we need extra power plants just for those high usage times.

Something like 50% of peak demand in the summer in CA results from use of air conditioners, pushing peak power requirements to about 65,000 MW. Cutting peak demand reduces the need for peakers, and makes it easier to achieve the 33% renewable goal. So, peak load can be shed through action like “cycling”,” where the utility cycles down individual air conditioners for a few minutes each hour, and by storing power generated off-peak for use on-peak.

Power storage takes many forms. It can be as simple (conceptually, anyway) as moving water uphill, and sending it back downhill across turbines to generate power when needed, or it can involve exotic technologies. It has tended to be expensive and inefficient. But that may be changing. As battery technology improves for hybrid and electric cars, it also has applications for localized electricity storage. For example, an air conditioning unit might be paired with a modest battery storage system that runs the unit during peak demand. Other approaches include using off-peak power to make ice and then using the ice for air conditioning on-peak.

Indeed, huge breakthroughs in local energy storage are taking place. For example, as I noted last year:

A scientist has figured out how to make and store energy by splitting water with sunlight. He says: “You’ve made your house into a fuel station [and we can get] rid of all the … grids” [he’s recently discovered an even cheaper way to do this]

So alternative energy versus fossil fuel and nuclear is only part of the question. At least as important, power must become distributed through micro power at the local level closer to the end user.

Indeed, given all of the mischief that the energy giants are causing, there is an argument that decentralizing power would help restore our democracy and our freedoms:

Wars are being fought in our name over oil.


Huge energy companies — some with earnings bigger than many countries — are calling the shots. As long as we rely on them to provide our power to us, we are buying into the imperial wars, injustice and destruction of our liberties.

If we install solar, wind, or whatever other micro equipment we can in our homes and offices, then we could decentralize power-generation — and thus — decentralize power away from the energy giants and their imperial political allies.

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  • Kwame Piankhi

    The End of the Nuclear Renaissance
    Excerpt: The nuclear renaissance was already tottering, but the disaster of Fukushima was the coup de grâce. It’s true, as nuclear advocates have argued, that the plants at Fukushima were old and that a disaster as big as the March tsunami was hard to plan for. No doubt the failures in cooling and containment systems that gave rise to the present crisis can be overcome and reactor designs modified to improve safety.

    But safety doesn’t come cheap, and redesigns mean delays. With no prospect of any further increases in subsidies and loan guarantees, it seems likely that most of the proposals for new nuclear-power plants in the United States will be abandoned. And, if only for reasons of diversification and speed of construction, the lost Japanese reactors will probably be replaced by gas-fired plants, with some renewables. Meanwhile the Europeans, who were reconsidering nuclear power, have moved decisively in the other direction. Even China has scaled back its targets for nuclear construction and extended the timescale, effectively halving the proposed rate of construction. Such a modest program will not produce the scale economies and operating experience needed to generate a substantial reduction in the cost of nuclear power over the next two decades.

    Meanwhile, the cost of PV has already fallen well below that of nuclear and is set to fall further. The average retail price of solar cells as monitored by the Solarbuzz group fell from $3.50/watt to $2.43/watt over the course of the year, and a decline to prices below $2.00/watt seems inevitable. For large-scale installations, prices below $1.00/watt are now common. In some locations, PV has reached grid parity, the cost at which it is competitive with coal or gas-fired generation. More generally, it is now evident that, given a carbon price of $50/ton, which would raise the price of coal-fired power by 5c/kWh, solar PV will be cost-competitive in most locations.

    The declining price of PV has been reflected in rapidly growing installations, totalling about 23 GW in 2011. Although some consolidation is likely in 2012, as firms try to restore profitability, strong growth seems likely to continue for the rest of the decade. Already, by one estimate, total investment in renewables for 2011 exceeded investment in carbon-based electricity generation.

    The stunning decline in the cost of PV has critical implications for the debate over climate policy. It is now clear that the cost of decarbonizing the economy, and the associated economic disruption, will be far lower than was suggested by previous estimates and even by many recent estimates that use out-of-date cost estimates. In this context, the continued adherence of most U.S. Republicans to conspiracy theories, in which the science of climate change is a cover designed to bring about radical economic and social change, is even more nonsensical than before. Perhaps 2012 will be the year when sanity finally prevails on this issue.

  • Zhen

    Carbon credits are just a Wall $treet theft plan. Your notion of “parity” uses the fantasy disadvantage of charging 5c/kwh for paying off worthless chits of paper that Goldman Sachs will trade for massive profit and which have near-perfect inelasticity, meaning it WILL cause another financial crisis.

    PV produce an average 2.5-3 hours worth of electricity daily, so a 1,000W panel produces only 3KWH of electricity or roughly 20 cents worth of electricity daily for this $2,400 panel that has twenty years life. So the life of this panel is shorter than the break-even date. On top of that, you omitted the cost of a grid-tie inverter which typically runs similar to the cost of the panels. You stole 15 cents to tilt the playing field in your favor with your “carbon credit” ponzi scheme. With no economic and viable technology to save this energy for use later, PV is of very limited utility.

  • It’s only common sense, which seems to be very uncommon.

  • Dr. Luis Contreras

    We choose our economy future for Arkansas: Distributed Renewable Energy

    As we struggle with AEP proposing another 345,000 Volt transmission line in Northwest Arkansas we are actively promoting Solar and Wind distributed alternatives.

    AEP, an immoral utility Ohio corporation with $55 billion in assets, threatens to take our land with the help of APSC who has approved every large AEP application for over 10 years … as key APSC officials are members of SPP, the agency in charge of the grid. Grid thinking and the illusion of a reliable grid made up of more EHV transmission lines is keeping Arkansas as the second poorest state in the nation.

    Why would AEP refuse to move a 345,000 Volt line a few feet to save the 50 year old Gentry Wildlife Safari, when it was granted 600 ft. variance from the center line? Instead, it chose to traverse the 400 acre park ignoring the USDA regulations that protect endangered and exotic wildlife.

    What is wrong with granting AEP the power of eminent domain? Any honest negotiations have
    to be based on a spirit of compromise and mutual respect, not on the threat of
    force. It is difficult to imagine AEP agreeing a comprehensive benefits agreement
    when AEP can walk away from the table and remove people by force. That is their plan, the wildlife must be out of the park in a few weeks.

    The final condemnation hearings are scheduled for October 26, 2013. Leon the owner of the Safari who worked 34 years for AEP and is on disability in their payroll, needs our help. Please visit our website and use the link “get involved” to join our online petition to save the Gentry community: :

    We are next in line …

  • Dr. Luis Contreras

    This is what AEP wants to do:

  • Dr. Luis Contreras

    This is God’s Creation

  • Dr. Luis Contreras

    We will protect God’s Creation