Exergy is a word from engineering that refers to the part of energy, which is the part that can do work. Not all energy, like the heat energy in water, or air at room temperature, can perform work. So when we speak of “energy” in the sense of something (like fuel) being “consumed” or “used up”, it is really exergy that we mean. The link between exergy and economics is usefulness.
– Robert U. Ayres. Paris, 29 October 2014
Photosynthesis was (and is) the biological process that removed carbon dioxide from the primitive atmosphere and left some of the oxygen in the atmosphere and sequestered CO2 in the earth’s crust. That happened as living organisms, such as diatoms, in the oceans attached carbon dioxide to calcium ions to make shells for themselves and left them as chalk or limestone. This went on for billions of years. When the oxygen level in the atmosphere rose enough, the new ozone layer cut the UV radiation level and made life on land feasible. Plants moved onto the land, and thrived spectacularly during the so-called Carboniferous era, several hundred million years ago when the CO2 level was still quite high by present standards. For over a hundred million years immense accumulations of dead plant biomass were covered by silt from erosion of the land surface. Meanwhile the bodies of dead marine organisms accumulated in some places under the sea. These accumulations were gradually compressed and “cooked” (pyrolized) releasing some of the hydrogen and converting the rest of the mass successively into peat, lignite and coal or (in the case of marine biomass) into bitumen and petroleum.
These accumulations constitute an energy (exergy) resource that currently drives industry and human civilization. We humans are now “un-sequestering” those stored hydrocarbons, combining them with oxygen and putting CO2 back into the atmosphere. Moreover, we are doing this at a rate thousands or even millions of times faster than the original accumulation. This ultra-rapid dissipation of stored exergy in the form of hydrocarbons clearly cannot continue indefinitely, not because we will run out of carbon fuels immediately, but because the atmospheric buildup of CO2 cannot continue much longer without catastrophic climatic consequences (IPCC 2007, 2014).
– For Exernomics. Robert Ayres, Paris. 25 October, 2014
The future of energy will be driven by a combination of price and availability, as it always has. But in an uncertain world one thing is very sure, and that is that this combination is already in rapid transformation, so we are looking at a very different future indeed.
In my recent book (“The Bubble Economy”) , I have argued that the rising price of oil, in particular (because of its unique role as a fuel for mobile applications) together with the declining price of “renewables” creates an opportunity for long-term investors. It is estimated that $2 trillion/year must be invested in renewable energy to meet future energy demand without increasing carbon dioxide emissions. Surprisingly, perhaps, current trends suggest that – contrary to widespread assumptions – such investments can be very profitable.
New York City skyline during power outage
– R. U. Ayres. Support for public presentations in Cambridge, Carnegie Mellon, Washington DC, November 2014
I want to present four theses of possible interest. First, that economic theory today has not caught up with the changes in the world since Adam Smith and David Ricardo. Then externalities were comparatively rare and unusual. Today they are pervasive, thanks to urbanization, networking and globalization. The financial externalities associated with bubbles now far exceed in damage the profits to the bubble-makers.
Second, economic growth since that time has been demand driven because energy prices kept falling,– on average — until the beginning of this century. Future growth is not guaranteed in a world of “peak oil”, and oil price bubbles. It is not certain that our grandchildren will be much richer than we are. Secular stagnation May be caused by energy constraints.
Third, the policy response by central banks – low and lower interest rates, creates the condition for the next bubble. This cannot continue.
Fourth, there is a profit opportunity approaching with a huge payoff If grasped it will kickstart growth, reduce unemployment, ameliorate the Greenhouse effect and help solve the problems of the pension funds.
The problem of providing pensions for retirees is becoming acute. Dependency ratios are climbing in all western countries. By 2050 they will double in most western countries. In Japan, the number of retirees, now 35 percent of active workers, will reach 80 percent. Most European countries will have dependency ratios greater than 50 percent. The US, now about 20 percent, lags a little, because of continued immigration (mainly from Latin America), but the ratio will rise to 40 percent by 2050.
Exernomics is a concatenation of two words, economics and exergy. Economics is a discipline, with scientific aspirations, concerned with the production, distribution and consumption of goods and services in human society. It is also concerned with markets, trade and prices. It has been called “the dismal science” (by Thomas Carlyle), because of the Malthusian argument (c. 1799) that human population will always grow faster than food supply, whence the future of mankind was destined to be constrained by poverty and starvation. That didn’t happen during the following two centuries. So, in recent years Malthus has become an object of derision by mainstream economists, who have adopted a contrary doctrine of perpetual growth driven by unending innovation and substitution.
But the mainstream has ignored the fact that one resource has no substitute. It is “useful energy” or – in techno-speak – exergy.