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EROEI Calculations for Solar PV Are Misleading

Wednesday, March 8, 2017 17:09
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(Before It's News)

The Energy Returned on Energy Invested (EROEI) concept is very
frequently used in energy studies. In fact, many readers seem to
think, “Of course, EROEI is what we should be looking at when
comparing different types of energy. What else is important?”
Unfortunately, the closer to the discussions of researchers a
person gets, the more problems a person discovers. People who work
with EROEI regularly say, “EROEI is a tool, but it is a blunt tool.
An EROEI of 100 is good compared to an EROEI of 10. For small
differences, it is not so clear.”

Because of the idiosyncrasies of how EROEI works, different
researchers using EROEI analyses come to very different
conclusions. This issue has recently come up in two different solar
PV analyses. One author used EROEI analysis ""
target="_blank">to justify scaling up of solar PV
. Another
author published an article in "" target="_blank">Nature
 that claims, “A break-even between the
cumulative disadvantages and benefits of photovoltaics, for both
energy use and greenhouse gas emissions, occurs between 1997 and
2018, depending on photovoltaic performance and model

Other EROEI researchers with whom I correspond don’t agree with
these conclusions. They recognize that in complex situations, EROEI
analyses cannot cover everything. Somehow, the user needs to be
informed enough to realize that these omissions result in biases.
Researchers need to work around these biases when coming to
conclusions. They themselves do it (or try to); why can’t everyone

The underlying problem with EROEI calculations is that EROEI is
based on a very simple model. The model works passably well in
simple situations, but it was not designed to handle the
complexities of intermittent renewables, such as wind and solar PV.
Indirect costs, and costs that are hard to measure, tend to get
left out. The result is a serious bias that tends to make the
EROEIs of solar PV (as well as other intermittent energy sources,
such as wind) appear far more favorable than they would be, if a
level playing field were used. In fact, published EROEIs for solar
PV (and wind) might be called misleading. This issue also exists
for other similar calculations, such as Life Cycle
and Energy Payback Periods.

Some Background on EROEI

Proposed types of energy alternatives are often analyzed using
target="_blank">Energy Returned on Energy Invested
calculations. For each type of energy product that is produced, a
ratio of the energy output to energy input
is calculated. A high ratio gives an indication that the particular
approach is very efficient, and thus is likely to produce an
inexpensive energy product. Coal is a typical of example of a fuel
with high EROEI. Wood cut using a hand saw would also have a very
high EROEI. On the other hand, a low ratio of energy
to energy input, such as occurs in the
production of biofuels, is expected to be high cost, and thus is
not suitable for expanding.

A derivative concept is “net energy.” This is defined as the
amount of energy added, when “Energy Input” is subtracted from
“Energy Output,” or variations on this
amount.There are many other related concepts,
including “Energy Payback Period” and “Life Cycle Analysis.” The
latter can consider materials of all sorts, not just energy
materials, and can consider pollution issues as well as energy
issues. My discussion here indirectly also relates to these
derivative concepts, as well as to the direct calculation of

The actual calculation of EROEI amounts varies a moderate amount
from researcher to researcher. On the input side, the researcher
must make decisions regarding exactly what energy inputs should be
included (manufacturing the solar panel, transporting the solar
panel to the construction site, building the factory that makes the
solar panel, disposing of toxic waste, etc.). These energy inputs
are then all converted to a common base, such as British Thermal
Units (Btus). On the output side, amounts are fairly clear when the
production of fossil fuels is involved, and the calculation is “at
the wellhead.” When output from a device such as a solar panel
is involved, there are many issues to be considered, including how
long the solar panel is expected to last and how many hours of
solar output will actually become available given the solar panel’s
siting (which may not be known to the researcher). In theory, the
energy costs of ongoing maintenance should come into the
calculation as well, but will not be available early in the life of
the panel when the calculations are made.

Two Kinds of EROEI: Return on Fossil Fuel
 or Return on Labor

The type of EROEI we generally hear about today is what I would
call “energy return on fossil fuel energy
.” This is a concept developed by Charles Hall in
the early 1970s, shortly after the book ""
target="_blank">The Limits to Growth
was published in 1972. In
fact, it sometimes includes other kinds of energy in the
denominator as well, such as hydroelectric. Most people who follow
today’s academic literature would probably assume that this is the
only kind of EROEI of interest when discussing today’s energy

In fact, there is a different kind of EROEI analysis that
preceded fossil fuel EROEI. This is return on the labor of an
animal, a theory that now goes under the name href=
target="_blank">Optimal Foraging Theory
. Falling return on
labor for animals represents the situation in which an animal has
to walk (or fly or swim) increasingly far, or is required to swim
increasingly upstream, to find the food it needs. Animal
populations tend to collapse when their EROEIs fall too low. Prof.
Hall taught ecology, so is well versed in the issues of energy
return on animal labor.

There is also a parallel analysis of the return on human
. Return on human labor has been studied for
many years, and is documented in books such as  "nofollow" href=
target="_blank">The Upside of Down
, by Thomas Homer-Dixon. In
fact, Homer-Dixon talks about falling EROEI with respect to human
labor being the cause of the fall of the Roman Empire.

The return on human labor can drop too low in several ways:

  1. If resources deplete or erode. For example, if topsoil becomes
    too thin, or energy supplies become depleted.
  2. If population rises too much, relative to resources. We are
    really interested in things like arable land per capita, and
    barrels of oil per capita.
  3. If a disproportionate share of the return the economy receives
    goes to some elite group, so the workers themselves don’t receive

Falling return on human labor is very similar to
falling wages. This falling return affects those at the
bottom of the employment hierarchy most, such as young people just
out of school and workers without too much education. These wages
may or may not fall in monetary terms; what is important is that
the goods and services that these wages buy fall on a per
capita basis
. Once falling return on human labor starts
happening, the whole system starts unraveling:

  1. Governments cannot collect enough taxes.
  2. Businesses lose the economies of scale that they previously
  3. A large share of debt cannot be repaid with interest.
  4. Individual citizens find that they cannot afford to get married
    and start new families because their wages are too low, and they
    have too much debt.
  5. In earlier times, epidemics became more common because workers
    could not afford adequate diets.

I would argue that falling return on human labor is the primary
type of falling EROEI that we should be concerned about, because it
represents the summation of all of the types of returns that the
economy is getting. It might be considered the Societal Return on
Energy Invested.

I would also argue that Societal EROEI, defined in this way, is
already too low. One way this can be seen is through the higher
unemployment rate of young people in many countries. Another is a
delayed rate of starting new families. Another is wages of many of
the less educated workers rising less rapidly than inflation.

The key things that make the calculation of EROEI of human labor
and EROEI of animal labor “work” as intended are

  1. Clear boundaries on what is to be included. The boundary is per
    animal, or per human being.
  2. Very close timing between when the energy is consumed (food or
    other) and when the output is available (animal energy used or
    goods and services consumed by humans).
  3. There is an easy way of adding up diverse inputs and outputs,
    namely using the financial system to count the worth of human
    labor, or an animal’s energy system to determine whether the food
    input is sufficient.

The one thing that doesn’t entirely “work” in this model is the
fact that the actions of humans can have an adverse impact on other
species, but this is not directly reflected in the EROEI of human
labor. This is not handled by the wage system, but it can be
somewhat handled in the tax system. Of course, if taxes are used to
compensate for the adverse impact that humans are having on the
ecosystems, the higher taxes will tend to reduce the return on
human labor further, and thus bring about collapse more

Fossil Fuel EROEI as a Cost Estimate

When Prof. Hall developed the concept of EROEI, the concept was
intended to be a rough cost estimate. If a particular type of
alternative energy required a lot of energy to be created, it would
likely be a very expensive type of energy; if very little energy
was required, it likely would be inexpensive. When making one
energy product using other energy products, energy is usually a
major item of input. Thus, it seems reasonable to expect that EROEI
calculations will work at least as a “blunt tool” for pricing.

The problem in making EROEI more than a blunt tool is the fact
that none of the three characteristics that make EROEI on
human labor work as expected is present for fossil fuel
. (1) Fossil fuel EROEI boundaries can be made wider
by making the list of energy inputs counted longer, but they always
remain short of the entire system. (2) Timing is a huge issue,
leading to a need for capital and a return on that capital, but
there is no adjustment for this in the calculation. (3) The fact
that energy quantities rather than prices are being used to add up
inputs means that we can never determine something that is
comparable to the overall cost of the complete supply chain.
Furthermore, similar to the problem with humans adversely affecting
other species, intermittent electricity adversely affects both the
electric grid and the pricing of other types of electricity. EROEI
calculations leave out these impacts.

The fossil fuel EROEI system ends up being similar to a system
that compares tops of icebergs, when these icebergs are floating at
somewhat different levels, and we can’t measure the relative levels
well. Furthermore, our measuring tool is restricted to only one
type of input: energy that can be counted somewhere in the cycle.
Adverse impacts, such as damage to the grid or to the electricity
pricing system, are not counted at all.

The danger with EROEI comparisons is that a person ends up with
“apples to oranges” comparisons. Generally, the more similar energy
types are, the more likely EROEI comparisons are likely to be truly
comparable. For example, EROEIs for the same oil field, made with
data a year or two apart, are more likely to be more meaningful
than a comparison of EROEIs for fossil fuels with those for
intermittent electricity.

Specific Problems with the EROEI of Solar

(1) Prospective EROEI calculations tend to have a bias
toward what is “hoped for,” rather than serving as a direct
calculation of what has been achieved. 
If the EROEI
of an oil field, or of a hydroelectric plant that has been in
operation for many years, is desired, it is not terribly hard to
find reasonable numbers for inputs and outputs. All a researcher
needs to do is figure out pounds of concrete, steel, and other
materials that went into the initial structure, as well as inputs
needed on a regular basis, and actual outputs; with these, a
calculation can be made. When estimates are made for new devices,
the bias is always toward what is hoped to be achieved. How much
electricity will a solar panel produce, if it is properly sited,
properly maintained, maintenance costs are very low, the electric
grid can actually use all of the electricity that the panel
produces, and all parts of the system last for the expected life of
the solar panel?

(2) All energy is given the same “weight,”
whether it is high quality or low quality energy. Intermittent
energy, such as is produced by solar PV, is in fact extremely low
quality output, but there is no adjustment for this fact in the
calculation. It counts the same as much better quality electrical
output, such as that provided by hydroelectric.

(3) There is no charge for the use of capital.
When capital goods such as solar panels are used to produce energy
products, this has several negative impacts on the economy: (a)
Part of the energy produced must go to pay for the interest and/or
dividends related to long-term capital use, but there is energy
cost assigned to this; (b) A country’s debt to GDP ratio tends to
rise, as the economy is required to use ever-more debt to finance
all of the new capital goods; and (c) The wealth of the economy
tends to become ever-more concentrated in the owners of capital
goods, leaving workers less well off. EROEI calculations don’t
charge for any of these deficiencies. These deficiencies are part
of what makes it virtually impossible to scale up the use of wind
and solar PV as a substitute for fossil fuels.

(4) EROEI indications tend to be misleadingly favorable,
because they leave out hard-to-estimate costs
analyses tend to focus on amounts that are “easy to count.” For
solar PV, the amount that is easiest to count is the cost of making
and transporting the solar PV. Installation costs vary greatly from
site to site, especially for home installations, so these costs are
likely to be left out. Indirect benefits provided by governments,
such as newly built roads to accommodate a new solar PV
installation, are also likely to be omitted. The electric utility
that has to deal with all of the intermittent electricity has to
deal with a whole host of problems being dumped on it, including
offsetting the impact of intermittency and upgrading the newly
added electricity so that it truly meets grid standards. There are
individual studies (such as  ""
and ""
) that look directly at some of these
issues, but they tend to be omitted from the narrow-boundary
analyses included in the meta-studies, which researchers tend to
rely on.

(5) Precisely how solar PV at scale can be integrated
into the grid is unclear, so costs required for grid integration
are not considered in EROEI calculations
. There are a
number of approaches that might be used to integrate solar PV into
the electric grid. One approach would be to use complete battery
backup of all solar PV and wind. The catch is that there is
seasonal variation as well as daily variation in output; huge
overbuilding and a very large amount of batteries would be required
if the grid system were to provide electricity from intermittent
renewables throughout the winter months, without supplementation
from other sources. Even if storage is only used to smooth out
daily fluctuations, the energy cost would be very high.

Another approach would be to continue to maintain the entire
fossil fuel and nuclear generation systems, even though they would
run only for a small part of the time. This would require paying
staff for year-around work, even though they are needed for only
part of the year. Other costs, such as maintaining pipelines, would
continue year around as well.

A partial approach, which might somewhat reduce the energy needs
for other approaches, would be to greatly increase the amount of
electricity transmission, to try to smooth out fluctuations in
electricity availability. None of these costs are included in EROEI
calculations, even though they are very material.

(6) Solar PV (as well as other intermittent electricity,
such as wind) causes direct harm to other types of energy producers
by artificially lowering wholesale electricity
 Wholesale prices tend to fall to artificially
low levels, because intermittent electricity, including solar PV,
is added to the electric grid, whether or not it is really needed.
In fact, solar PV adds very little, if any, true “capacity” to a
system, so there is no logical reason why prices for other
producers should be reduced when solar PV is added. These other
producers need the full wholesale cost of electricity, without the
downward adjustment caused by the addition of intermittent energy
sources, if they are to obtain a sufficient return on their
investment to make it possible to continue to provide their

These issues tend to drive needed back-up electricity generation
out of business. This is a problem, especially for nuclear
electricity providers. Nuclear providers find themselves being
pressured to close before the ends of their lifetimes, because of
the low prices. This is true both in ""
 and the  target="_blank" href="/r2/?url="
target="_blank">United States

In some cases, extra “ ""
target="_blank">capacity payments
” are being made to try to
work around these issues. These capacity payments usually result in
the building of more natural gas fired electricity generating
units. Unfortunately, these payments do nothing to guarantee that
the natural gas required to operate these plants will actually be
available when it is needed. But gas-fired generating units are
cheap to build. Problem (sort of) solved!

(7) Electricity generation using solar PV cannot be
scaled up very well. 
There are multiple issues
involved, including cost, debt, difficulty in handling the variable
output, and the adverse impact of the intermittent electricity on
the profitability of other carriers.

What Should Be Done Next? 

It seems to me that a statement needs to be made that EROEI was
a preliminary pricing method for various fuel types developed back
in the early 1970s. Unfortunately, it is a blunt tool, and is not
really suitable for pricing intermittent electricity, including
solar PV, wind energy, and wave energy. It presents a far more
favorable view of adding these energy types to the electric grid
than is really the case. Hydroelectric energy is sometimes
considered intermittent, but is really “dispatchable” most of the
time, so it does not present the same problems.

EROEI calculations are in a sense the output of a very simple
model. What we are finding now is that this model is not
sufficiently complex to deal with the way intermittent electricity
affects the system as a whole. What needs to be substituted for all
of these EROEI model results (including “net energy,” Life Cycle
Analysis, and other derivative results) is real world cost levels
using very much wider boundaries than are included in EROEI

Euan Mearns has shown that in Europe, countries that use large
amounts of wind and solar tend to have very high residential
electricity prices. This comparison strongly suggests that when
costs are charged back to consumers, they are very high. (In the
US, subsidies tend to be hidden in the tax system instead of
raising prices, so the same pattern is not observed.)

Even this comparison omits some potential costs involved,
because intermittent electricity concentration levels are not yet
at the point where it has been necessary to add huge banks of
backup batteries. Also, the adverse impact on the
profitability of other types of electricity generation is a major
issue, but it is not something that can easily be reflected in a
chart such as that shown in Figure 1.

It seems to me that going forward, a completely different
approach is needed, if we want to evaluate which energy products
should be included in our electricity mix. The low energy prices
(for oil, natural gas, coal, and electricity) that we have been
experiencing during the last 30 months are a sign that consumers
cannot really afford very high electricity prices. Analysts need to
be looking at various scenarios to see what changes can be made to
try to keep costs within the amounts consumers can actually afford
to pay. In fact, it probably would be helpful if building of new
generation could be reduced to a minimum and existing generation
could be kept operating as long as possible, to keep costs

The issue of low wholesale prices for electricity generated by
nuclear, gas, and coal needs to be analyzed carefully, since, for
example, France cannot easily get along without nuclear
electricity. Nuclear energy is generally a much larger provider of
electricity than wind and solar. Somehow, the financial returns of
non-intermittent providers need to be made high enough that they
can continue in operation, if they are not at the ends of their
normal lifetimes. I am not sure how this can be done, short of
banning intermittent electricity providers, including those
currently in operation, from the grid.

A Long-Term Role for Solar PV 

It appears that our civilization is reaching limits. In fact, it
seems likely that our current electric grid will not last many
years–probably not as long as people expect solar panels will last.
We also know that in past collapses, the only thing that seemed to
partially mitigate the situation was radical
simplification. For example, China transported goods in
animal-powered carts prior to collapse, but  href=
target="_blank">changed to transporting goods in wheelbarrows
after it collapsed about the third century A. D.

Building on this idea, the place for intermittent renewables
would seem to be off the electric grid. They would likely need to
operate in very small networks, probably serving individual homes
or businesses. For example, some homeowners might want to set up 12
volt direct current systems, operating a few LED lights and a few
specially designed 12 volt direct current
appliances. Businesses might want to do more. The problem, of
course, comes in maintaining these systems, as batteries degrade
and other parts need to be replaced. It would seem that this type
of transition could be handled without huge subsidies from

The belief that we can maintain our current electric grid system
practically indefinitely, using only wind + solar + hydroelectric +
biomass, is almost certainly a ""
target="_blank">pipe dream
. We need to be looking at the
situation more realistically, and making plans based on what might
actually be feasible.


[1] In defining net energy, some would say that Energy Input
should be multiplied by a factor of three before the subtraction is
done, because input energy is only partially counted in most
calculations. Another variation is that the calculation varies by
energy product, and whether EROEI has been calculated using a
“wellhead” or “point of use” approach. These variations further add
to confusion regarding exactly which amounts are comparable to
which other amounts.

Filed under: ''
target="_blank">Financial Implications
Tagged: "nofollow" href=
target="_blank">Energy Returned on Energy Invested
, "nofollow" href='' target=
, '' target="_blank">EROI,
'' target=
"_blank">intermittent electricity
, '' target="_blank">solar
target="_blank"> "" />
width="1" height="1" />


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