Dr. Charles Hall: The Laws Of Nature Trump Economics

Dr. Charles Hall may not be a name you instantly recognize, but it should be.

Now a Professor Emeritus of the College of Environmental Science and Forestry, Dr. Hall is a rigorous researcher of energy, oil, biophysical economics -- and was a critical early pioneer in developing the key resource metric of Energy Returned On Energy Invested (EROEI).

Here's how Hall describes EROEI in layman's terms:

These energy investment ideas are everywhere in nature.

Certainly business people know about investments, but you've got to realize that anytime that you're investing, you investing not only money, you're investing energy. And, in fact, we consider money to be a lien on energy, a promissory note on energy.

So, if, for example, you buy in New York City a bagel for $1, that bagel cannot possibly get there without the use of a considerable amount of energy. And that energy is, for example, energy used in Louisiana to take natural gas and turn it into nitrogen fertilizer. And then it's put in a barge and barged up  the Mississippi River to Nebraska. And then a tractor spreads in on a field. And then it plows up the field and plants wheat seeds. And then later comes along and tills the soil and maybe takes care of the weeds or whatever and certainly harvests it. And then more energy is used to take the harvested wheat and grind it up and turn it into flour. And then they put it in a sack and put it on a railroad train and ship it to New York City. And there somebody boils a pot of water to cook the bagel. Oh, and they use electricity to mix the batter. And then you have a bagel.

That would not have taken place without the use of energy at every step.

And that same is true for everything that goes on in our economy. Everything that goes on in our economy requires energy for it to take place. And so we've examined that for a long, long time. Using the concept of energy return on investment and then later we've developed this into a whole approach called biophysical economics.

After a life's career of looking at the world through the lens of EROEI, Hall is very concerned that, as a global society, we are hurtling towards an energy crisis that will forcefully (and likely painfully) downshift our standard of living within the lifetime of the current generation. And yet, our current economic models remain blind to the possibility of resource limits -- so we are highly likely to be caught completely unprepared by this approaching crisis:

Economics is practiced in the United States as a social science. When I first looked into economics I was astonished that it's not consistent with the law of conservation of energy nor the second law of thermodynamics nor the laws of conservation of mass. All of those things do not enter into the basic economic models. In fact, the basic economic models, as far as I'm concerned, just make no sense if you have a background in the natural sciences(...)

I think that we're likely be really blindsided by the decline of oil and gas in near future. The people who have examined the long-term future of fossil fuel availability predict this well within a generation. We're probably going to be faced by severe restrictions in all of our fossil fuels – in oil, in gas, and even coal. We may live in interesting energy times(..)

It's just astonishing what I read in newspapers about people who don’t understand the importance of resources and the physical world in everything we do. Now, it is true, there has been a pretty health dose of examining climate and its relation to economics, and I think that's good. But
I think that's, at most, half the story because I think resource limitations are likely to be at least as important as climate change going into the future, and then we have to think about them at least as much as we have been doing with climate. We have to think about the resource issues much better than we have.

Somehow people think the resource issues have been resolved by the market, but that's not true at all, although, you know, I guess as long as the price of gasoline is fairly cheap, people don’t worry. They think the issue's been resolved. The issue has not been resolved at all. The Limits To Growth and everything associated with that – they're not been proven wrong. One might argue that their timing was not on the money, that things that are taking a little bit longer than was anticipated, but that doesn't mean that the chickens aren't coming home to roost. And I see them coming home rapidly and especially in the poorer countries of the world – they're just getting creamed by the interaction of population growth and resource limitations. And depletion of oil wells and depletion of soils and on and on and on. It's just a terrible situation for many countries.

Those interested in learning more about Dr. Hall's work after listening to this podcast should consider purchasing his new book Energy and the Wealth of Nations; An Introduction to Biophysical Economics

Click the play button below to listen to Chris' interview with Dr. Charles Hall (61m:23s).

This is a companion discussion topic for the original entry at https://peakprosperity.com/dr-charles-hall-the-laws-of-nature-trump-economics/

Dr. Hall described himself as being “well trained” which generally doesn’t impress me. However, Dr. Hall is not only well trained he has common sense, is a deep thinker and has a sense of humor as well. A delightful interview with an “oh shit” kind of message. Would welcome an interview with Dr. Hall anytime and will check out his book.
Great choice!

A very good discussion and no disrespect to Dr. Hall but I’d really appreciate it if you could ask Dr. Tim Morgan on another podcast to discuss EROEI and the development of his own SEEDS appraisal.
His work “Perfect Storm” at Tullett Prebon and subsequent publications (“Life After Growth”, “SEEDS” etc.) are my go-to resources whenever EROEI are mentioned. The bloke’s a genius - find him, hunt him down with hounds if necessary… he’s worth his weight in gold!!
Nobody has the answers or a timeline - but Tim Morgan has more understanding of EROEI than anyone else (IMHO!).

Just one of the many things to get your knickers-in-a-knot over. However, I tend to be more sanguine (sorry, if I repeat myself):

I’d be curious to see how the EROEI analysis on Spain’s solar plants change as we reduce the costs on the panels. The wiki page on Spain says that half of the panels were installed by 2008, back when panels were about $3.20 per watt, and now they’ve dropped to $0.50 per watt. Of course a lot of the costs of a solar plant isn’t the panels - but certainly a fair amount of it is.
So would an 85% reduction in panel costs end up doubling the EROEI? Less? More?
And how about rooftop solar? No need for transmission, fences, etc.
A lot of these analysis were done back in the days of Oil Drum. I’d like to see them updated for the latest cost structures.
Ideally we get a spreadsheet where we can play with the cells ourselves!

Brunel wrote:
A very good discussion and no disrespect to Dr. Hall but I'd really appreciate it if you could ask Dr. Tim Morgan on another podcast to discuss EROEI and the development of his own SEEDS appraisal. His work "Perfect Storm" at Tullett Prebon and subsequent publications ("Life After Growth", "SEEDS" etc.) are my go-to resources whenever EROEI are mentioned. The bloke's a genius - find him, hunt him down with hounds if necessary.... he's worth his weight in gold!! Nobody has the answers or a timeline - but Tim Morgan has more understanding of EROEI than anyone else (IMHO!).
Tim Morgan heavily "borrowed" from the entire crash course book and video series (ideas, graphics, flow, and phrases) for his 'perfect storm' report and then failed to attribute anything to myself or Peak Prosperity. This was not inadvertent, but happened after he'd found the Crash Course, congratulated me on it by email, and asked a few follow up questions. Later when a book of his came out it turned out that he did this same thing to several other authors (lifting and "borrowing" without attribution, passing off the ideas, phrases and graphics as his own), two of whom contacted me to see if I was interested in joining an action they were planning to take against the publisher to force a retraction or even recall of all outstanding books. The plagiarism was extensive and obvious. I am a very forgiving person, but proper attribution is a must in my world, and I can't really bring myself to shine light on Mr. Morgan even though his message is the same as mine. I suppose I should be sincerely flattered by the imitation, and thankful that however inelegantly it was done the Crash Course message was picked up and carried elsewhere, and I am on some levels, but I'm still not terribly interested in promoting Morgan's career.
davefairtex wrote:
I'd be curious to see how the EROEI analysis on Spain's solar plants change as we reduce the costs on the panels. The wiki page on Spain says that half of the panels were installed by 2008, back when panels were about $3.20 per watt, and now they've dropped to $0.50 per watt. Of course a lot of the costs of a solar plant isn't the panels - but certainly a fair amount of it is.
I talked about this next solar EroEI analysis in the podcast, but it was revealing enough to me that I should include it here. I found this recent study to be quite extensive and treading on some new ground, after building off of Hall’s work as well as many others. The major features are that you have to use real results, not calculated (face plate) potential returns of solar systems. In the temperate regions, where a lot of solar is installed, it turns out that the down time is significant (because of clouds, low sun angle for half the year, etc.) and that when you add it al up these authors discovered that the ERoEI return for solar is below 1. For those with the passion for it, this study is a great read because it fully explores the extended boundaries that have to be included for a full life cycle ERoEI analysis. Examples include the ‘upstream’ costs of generating purified silicon, shipping the modules from plant to installation site, etc.
Energy Return on Energy Invested (ERoEI) for photovoltaic solar systems in regions of moderate insolation July 2016 (Lots and lots of geeky math and explorations of study boundaries removed here…) Conclusion The calculated value for ERoEI is dimensionless, constituting the energy return (2203 kW he/m2) divided by the energy invested (2664 kW he/m2) – a ratio of 0.82. It is estimated that these numbers could have an error of ±15%, so that, despite a string of optimistic choices resulting in low values of energy investments, the ERoEI is significantly below 1. In other words, an electrical supply system based on today’s PV technologies cannot be termed an energy source, but rather a non-sustainable energy sink or a non-sustainable NET ENERGY LOSS. The methodology recommended by the expert working group of the IEA appears to yield EROI levels which lie between 5 and 6, but which are really not meaningful for determining the efficiency, sustainability and affordability of an energy source. The main conclusions to be drawn are:
  • The result of rigorously calculating the “extended ERoEI” for regions of moderate insolation levels as experienced in Switzerland and Germany proves to be very revealing. It indicates that, at least at today's state of development, the PV technology cannot offer an energy source but a NET ENERGY LOSS, since its ERoEIEXT is not only very far from the minimum value of 5 for sustainability suggested by Murphy and Hall (2011), but is less than 1.
  • Our advanced societies can only continue to develop if a surplus of energy is available, but it has become clear that photovoltaic energy at least will not help in any way to replace the fossil fuel. On the contrary we find ourselves suffering increased dependence on fossil energy. Even if we were to select, or be forced to live in a simpler, less rapidly expanding economic environment, photovoltaic technology would not be a wise choice for helping to deliver affordable, environmentally favourable and reliable electricity regions of low, or even moderate insolation, since it involves an extremely high expenditure of material, human and capital resources.
  • Research and development should however, be continued in order in future to have more efficient conversion from sunlight to electricity and a cheaper, more reliable PV-technology offering increased efficiency and a longer, failure-free lifetime. The market will then develop naturally.
While there’s a lot of methodology involved, the summary table of the primary energy inputs for temperate latitude solar installations gives an indication of where the pressure points lie if we are to substantially improve solar’s possible gains. In summary, ‘cheaper’ panels is not going to solve anything if cheaper does not also means ‘substantially less energy went into their construction.’ Also, even if the energy input into the components dropped to zero, according to the above table that would only account for about half of the energy costs and so the ERoEI of solar would then only rise to a little less than 2. Perhaps there’s a lot wrong with this analysis, I cannot say. But if there were serious policy makers in the world, they’d immediately fund an even more exhaustive study to determine if this is true or not. Why? Because “investing” tons of public money into solar is a public policy disaster if the EroEI is below 1. Heck, probably a disaster and a waste if it’s below 3, or even 5. We just don’t know, and that’s the issue. We really should. It’s among the most important questions of our era.

Enjoyed the discussion very much and highly respect Dr Hall’s immense contributions to the field! Excellent choice.
The head scratcher for me was their use of $'s (fiat currency) as the proxy for “energy in”. It seems pretty loose to use a measure that is inherently volatile and subject to all kinds of short and long term forces. Compounding this currency volatility, as Dave Fairtex observed above, the price of components also are subject to a life-cycle where the cost of new products are high until maturity and scale are reached.
Given all that, it would seem helpful to attempt to normalize the proxy measure to minimize all this noise so that the EROEI that isn’t a ‘point in time’ measure. Although harder to get at, using joules, watts or BTUs would seem to be a materially better way to determine EROEI. Perhaps I’m missing something.

So a rough calculation shows that southern california has about double the insolation level of Germany. Presumably, that puts the EROEI at - perhaps - 1.6. Still not great from a society point of view.
If we toss them on a roof instead of onto the grid, that helps. Likewise, if they are used to charge up your electric car, there’s no need to worry about intermittent issues since your car itself is the buffer.
Is it wrong to assume that the production $$ cost is a “rough overall proxy for the energy going into production?” Certainly it reduces capital costs, which definitely helps EROEI.
It is interesting to note that while a panel is $0.50/watt right now, the all-in cost for rooftop solar is $3.20/watt. Panel costs are a small factor at this point.
Might I ask why solar and wind are - perceived - as beating natural gas from the viewpoint of new power generation? Is that all about subsidies? Certainly the vast bulk of new installations are solar and wind - so much so that it has single-handedly caused GE stock to crash. Apparently the sale of the gas generating plants has fallen through the floor, much to the surprise of the GE executives.
From the standpoint of “self-insurance against rising electric prices during a time of possible future fossil fuel scarcity” (and as an alternate power source for your electric car/bike/goped), solar seems like a no-brainer investment for an individual.

I wouldn’t want to live in it, but I could imagine a world where energy at least begins to separate from economic production. Perhaps “tools” like VR take off in a social revolution. What starts as an expansion in telecommuting becomes a cultural vice for avatars and ‘non real’ products to adorn people in their virtual world. The opioid epidemic and social media revolution show that we are ready for this kind of sad existence. The real world would just be a handful of pop culture characters and politicians. Robots do the manufacturing, and the value add jobs are virtual. The wasteful consumption of consumer products would be virtual as well. There are certainly some solutions out there for food production (aquaponics) but that’s probably the hardest industry to develope. I’m sure we would have years of falling diet quality before we turn to solutions like that.

Considering the infancy of computer modeling, in the early 1970s, Limits to Growth was unbelievably accurate, so far.

I happen to be fortunate that I live in an area blessed with an abundance of fossil fuels and forests. I can supplement my heating bill by burning wood, using dead fall or infected trees rather than healthy stands of available source wood. The ERoEI for these trees is fantastic, from a human perspective. However, there are bigger issues that can exacerbate the predicament facing the planet. Take you pick from the list. Here is just one that has a potentially huge effect on the future direction of where to invest our time and money; if we have enough time! This can apply to any part of the country facing the effects of climate change. I’m sure we can afford the 2 + minutes for more revelation! Enjoy?

First a housekeeping note… Return is misspelled in the title of the article…
I noticed the other (sunny) day that the solar panels on the local food coop were covered with snow. Obviously they were not functioning or someone would have cleared the snow. This same store is certified LEED platinum or gold but the designer placed the checkout stands too close the the entrance/exit doors. The doors open and shut continually as customers check out. Apparently (I asked) they could not adjust the sensor on the doors. Bottom line: this one common sense item voided all of the energy savings from the rest of the store. It should be noted that the ability to get the LEED certification in the first place was made possible due to the largess of someone who had the good fortune to be the (sole?) nephew of the childless co-founder of UPS. If we truly lived sustainably there would not even be a need – or a dramatically reduced need – for delivery services such as UPS. Most of what we do with respect to sustainablity is at the margins only.
It doesn’t take a lot of thought to realize that passive solar has a far higher ERoEI than using solar panels. On a sunny 20 degree or so day (when there are no “contrails”) my house temperature will increase from the set temperature of 63 degrees to 69 or 70 degrees without the furnace coming on. However, my observation is that very few people open the blinds on their south facing windows. (Possibly because all their neighbors and folks passing by can see what drivel they are watching on TV. Screens are so big that I can easily determine what the neighbor 100 feet across the street is watching.) We’ll only have “serious policy makers” when people wake up to the fact that our future is so screwed.
On a related topic… Is anyone aware of a study that has looked into how detrimental “contrails” are to plant yields?

I saw this link (https://globalnews.ca/news/4045344/vancouver-lamborghini-snow-dirvers/) when looking at your globalnews link. The backup plan can be found in the last photo of the article. Bicycles.
My spouse is Canadian and was living in Kamloops BC when we got married 30 years ago. It has been stunning to see the devastation of the pines in the area. One used to be able to look in any direction and see a forest of green. No longer. All the trees have died and been logged. I’m somewhat surprised that we have not been impacted here in Spokane.

Everyone keeps dancing around the gigantic elephant in the room: overpopulation. It’s my opinion that planet earth is massively over populated with us “humanoids” and a 90% reduction would still not be enough since the oceanic life has already been reduced by roughly the same amount. When I fly over the midwest I see every square inch covered with farms. What do think will happen when the ground water and fossil fuels (aka fertilizer) finally runs out? A while back I read that the state of Vermont was almost completely clearcut 100 years ago for charcoal, and that was with a much smaller population. One way or another there will be a depopulation. It’s our choice whether we do it in the least painful (and economically most painful) way.
Our present lifestyle and economy is like a Keynesian ecology. Keep “printing” people until the entire planet goes bankrupt (aka sterile).

I am just a casual observer to the peak oil/ peak energy story. I first became interested in the topic back in 2006 When I discovered movies that introduced the concept of peak oil. This lead me to books such as the Long Emergency by James Howard Kunstler and Peak Everything by Richard Heinberg as well as many others. All of these videos and books seemed to all claim that an energy crisis was just around the corner and that very soon we would be seeing energy shortages and shocks to the system etc.
At first these stories seemed to be playing out as predicted such as when oil went up to $147/barrel in 2008. But then, the prices dropped back down and they seem to have stayed there ever since.
During this time, these advocates seem to all continue to say that a crisis is looming over the next horizon. At first it was 2010, then 2012 then 2015 now we are here in 2018 and the trains seems to continue on.
Can anyone tell me why this seems to be the case? Is this a case of needing to sell books and videos and therefore needing to scare people into being interested?
I just wish that I felt like the story could somehow be more accurately tied to the data. I think all of these books and videos would have been just as effective if they said this is a problem that is coming and we will start to see the effects in 2020 or 2030 or whenever the real crisis is likely to hit us.
I feel that if that were how it was presented, a person could then feel more confident preparing for it.
At the moment it seems like preparing may just be a waste of effort and resources.
Does anyone else feel this way?

skipr wrote:
Everyone keeps dancing around the gigantic elephant in the room: overpopulation. It's my opinion that planet earth is massively over populated with us "humanoids" and a 90% reduction would still not be enough...
No, most at Peak Prosperity don’t dance around overshoot. I believe you are addressing this criticism to the wrong group. I certainly don’t. My opinion on the subject was published two days ago in the Arizona Star (Tucson). However, I would argue that the Earth can still support more than the 750 million that you propose, granted at a much more conservative lifestyle.

many people think we can mitigate the “Limits to Growth” with technology, but that is a fool’s errand we attempt at our own demise. the reality is that “magic green” intermittent energy capturing devices cannot exist without the underlying, unsustainable, fossil fuel powered, mining and manufacturing industrial infrastructure.
i just finished a 35 year career designing, installing AND MAINTAINING solar electric systems and i can assure you they are neither “green” or “renewable”. most people promoting “clean, green” solar, have not lived with it long enough to experience the lifecycle costs. in my personal case, my oldest working module is from 1987. it is severely delaminated but still making usable power and is a part of my grid tied with battery backup system… BUT there is the issue of the mean time between failure of inverters which is around 5 to 7 years. batteries and charge controllers also have similar, finite lifetime realities. if i had to pay for someone to do the repairs, the system would never make enough money in reduced power bills (@ .17/kWh) to pay for the ongoing maintenance.
so basically a typical solar electric system is a bunch of expensive, high tech, fossil fuel created equipment that every few years needs more expensive, high tech, fossil fuel created replacement parts to keep operational.
another sad reality is solar retailers and installers make more money installing larger systems, which incentives waste. add to this is the fact that no one is interested in reducing their consumption or changing their behavior, so energy audits are a thing of the past. this means solar is basically about enabling waste and justifying non-negotiable lifestyles.
that being said, while incredibly expensive to purchase and maintain (a clear net loss), i do enjoy the resiliency they provide our “lifeboat”. without solar pv, in a “no-grid” scenario, we would not be able to pump water for food growing operations.

I think this varies alot. What has been your experience on reliability ? Did the better inverters last longer than the new ones made overseas ? What about solar panels ? So, given your experience, has anything stood out as being overall much better or overall much worse ?

My system was installed in 1998, and is doing great. The original panels are Astro Power ( the cells are made from reject wafers from semiconductor manufacturing), the inverter is a Trace SW4048 and the charge controller is Trace. Maybe I have been lucky, or maybe this era of products is especially durable. You are right that the main benefit would be water pumping in a long term grid down, although it would be cheaper to just have a dedicated panel direct to a DC well pump if someone did not have a system yet. I changed out the well pump when I did this to be a 120V lower horse power pump that runs great off of the inverter. My system was put in when smaller system were being done as my original panels were 24 of the Astropower panels, for 2.4kW label, which was considered 2kW actual. About 9 years ago I added a couple evergreen panels and another charge controller for the 2nd input to the inverter, only 3 panels which is total 630W label rating.
Batteries generally do not last. One and a half years ago I upgraded to a new, long lived battery technology, Aquion. These batteries have little environmental downside, no weird metals, etc… are very robust in terms of temperature and can be run down to almost no charge. This particular battery technology could be rebuilt easily, so last forever, as the thing that wears out is the synthetic cotton layers in the cells, the cells come apart easily and these could be rebuilt. Unfortunately, the company did not have enough funding to get thru the initial growth phase, and they are not in manufacture right now. They were very easy to use even in my old set up. No maintanence, works great. It all is going great with never a repair. But, you are right, at some point that inverter is going to break ( given the cobwebs and temperatures it is doing great). Hard to say on the panels, so far, so good. Probably give out a bit less power

Have similar studies been done on mirror/turbine based solar, where the light is concentrated with mirrors onto a central tower where the resulting heat is used to boil water (or some other liquid) to feed turbines?