Ch. 24 Ridiculously Expensive and Wildly Inefficient

 "But what if I were to say to you that 25 years from now,

the bulk of the energy you use to...

operate every part of the global economy

will likewise be nearly free?"

- Jeremy Rifkin,

The Zero Marginal Cost Society

The current Second Industrial Revolution energy and transportation system we find ourselves stuck in is, as has already been said, ridiculously expensive and wildly inefficient. This may seem like an exaggerated or hyperbolic statement, but by the end of this chapter, this assertion will be hard to deny.

Let's talk about inefficiency first.

Our current system is centralized, top-down. It's a closed infrastructure, proprietary system. Fossil fuel plants are dozens, if not hundreds of miles away from the endpoint users. One power plant feeds out to multiple users, hundreds and thousands of them. Every structure connected to this grid has to have power lines running to it, and they are nearly always above ground. 

We'll start with the inefficiency of these long distance power lines. There is a significant amount of energy loss during transmission from the power plant to our homes and offices. Depending on various factors, that loss is anywhere from 3-20% (Gunther, 2022)

But this is just the beginning. Let's look at aggregate energy efficiency. 

Aggregate energy efficiency: The ratio of useful to potential work that can be extracted from materials. 

Here are a couple of simple ways of understanding aggregate energy efficiency.

Let’s pretend you’re a lion on the Savanna, and you’re hungry. You hunt down and kill a gazelle, and eat it. But even if you eat the entire gazelle, you’re only getting about 20% of the caloric energy stored in its body. Because you have to figure in the energy that you expended to stalk, chase, kill, eat, and digest (loss in conversion of energy) the gazelle. 

Then there’s the example of Ivan Ilych, a Catholic priest and philosopher from Austria. He once wondered if he could calculate the true speed of an automobile. 

He figured that once you take into account the time that you spend sitting in traffic, or stopped at a light, or having your car serviced in the shop, the hours you have to work in order to pay for your car, insurance and all of the rest of the externalities, you wind up with a true speed of…5 kilometers per hour. Walking speed! 

In other words, driving really isn’t that efficient at all.

Now let’s use this same idea to examine the aggregate components when it comes to energy provided by something like coal. 

Our fossil fuels (oil, coal, and natural gas) are only found in a few places in the world. Finding those deposits, refining them, and shipping them is monstrously expensive and time consuming. 

First you need to find the coal. Once you’ve scouted out the site, you have to mine it up out of the ground. This coal is shipped by rail or truck, which themselves have their own aggregate externalities. All of these various steps represent a loss of "potential" energy. 

There is additional energy lost when the coal is burned and converted to electricity, and as we've already discussed, you then have additional energy loss in the transmission from the power plant to the end user. 

Just how inefficient is our current system?

The American Council for an Energy Efficient Economy (ACEEE) rated the countries with the best energy efficiency. The US didn’t even make it into the top three of the countries rated, with France topping the list (Pressler, 2022).

The ACEEE used four categories to rate countries on their energy efficiency: National Efforts, Buildings, Industry, and Transportation. The US not only scored at the bottom of the list overall, it was also at the bottom of every one of the four categories, with an estimated energy efficiency of 54 (compared to the winning score France achieved, 75.)

But when you look at the aggregate return by itself, without the extra criteria the ACEEE uses, you’ll find that the US sits at an aggregate efficiency of 14%. Which means a whopping 86% of the potential energy of our system is lost entropy. (Japan is at the top with 20%, which seems to be as efficient as the current system can possibly get.)

Efficiency peaked in the 1990s, but our GDP growth rate and productivity have actually been on the decline since 1970. 

This is what we mean by wildly inefficient. Our entire economy is based on a system of energy that is not just inefficient, but peaked in it's efficiency back in the 1990's. 

As long as we are stuck in this system, we will see no significant increase in the growth of our economy. 

This also gives us our first clue as to why this system is so ridiculously expensive. This inefficiency comes with a commensurate price tag. 

Why our current system is so ridiculously expensive.

Let’s go beyond the hard numbers, and look at the idea of externalities. 

An externality is a side effect or consequence of an industrial or commercial activity that affects one or more other parties…without this being reflected in the costs of the goods or services involved (Deepak, 2019).

One example would be pollution of the environment when burning coal for power. The cost to the human race in terms of environmental damage is monumental, and yet that cost was not reflected in any fiscal way on the companies who engaged in this pollution for decades, before regulations began to gain steam in the 1970s.

Capitalists and businesses don’t want to pay for externalities, and will actively resist doing so. They’re profit-based, and their only motive is to create value for the shareholders. Shareholder supremacy strikes again. 

The capitalists and businesses feel no obligation to take care of the asthmatics, the cancer patients, or those poisoned by microplastics in their bloodstream. It’s actually possible that people are force fed so much microplastic that they eat the equivalent of a credit card per week (Houston, 2022).

Direct and Indirect Fossil Fuel Subsidies

Taxpayers also pay a fortune in the form of direct fossil fuel subsidies. But the cost of cleaning up the pollution caused by those same industries can be thought of as indirect subsidies. We’re subsidizing the fossil fuels industry so their profits don’t take a hit from cleaning up the mess they created in the first place.

It is this combination of direct and and indirect subsidies that make our system so expensive.

Remember, we pay more tax dollars towards fossil fuel subsidies than we do for defense. 

Here's how this breaks down.

The annual bill for taxpayers in the form of direct fossil fuel subsidies is $20 Billion (Urpelainen, 2021). These tax breaks would go much further if they were given to renewable energy companies instead, but the fossil fuels industry is in control.

Now let’s look at the indirect subsidies more closely. $14.5 billion is billed to consumers to help those with low income keep their utilities on during periods of severe cold or heat. These taxpayer funded initiatives help people, but that’s a lot of expense spared the fossil fuel company, and part of the inefficiency.

Air pollution and infrastructure damage as a result of the energy industry are paid for by the taxpayers. $686 billion was spent in 2015, with another $10 billion a year in related healthcare costs.

What’s worse, these costs are on the rise. Thanks to climate change, property damage is expected to increase by 60% by 2040 (Cho, 2022). Global warming is expected to increase our indirect spending by 20% by the year 2100.

When you do the math, we’ll be spending $2 trillion a year paying for property damage caused by pollution, wildfires, floods, hurricanes, and sea level rise. (Keep this cost in mind when we compare it to the cost per year of reversing global warming in Part 4: Ecology.)

Insurance companies are going bankrupt because they can’t keep up (Cho, 2022). It’s almost impossible to get homeowners insurance in certain parts of California now due to the danger posed by wildfires. And Florida is beginning to see their own insurance crisis due to extreme weather events. 

What happens if an insurance company goes bankrupt, and they can’t cover policyholder claims due to a natural disaster? Simple: The government steps in to pay for it. And who funds the government? Taxpayers, primarily from the working class.

If insurance companies are no longer viable, then those interested in owning a home will have to take all the risk upon themselves. Fire, flood, and other catastrophes would simply devastate any unlucky homeowners.

And speaking of defense spending, this represents an additional externality. The costs of the military needed to protect these oil and gas investments. The morality of these military interventions is seldom questioned more than with a cursory rebuttal. But it's a conversation that is past due. 

In order to build a better world, we need productivity. 

We need GDP that grows at an increasing rate, supercharged if possible. The impact on society will be profound. This will affect people’s ability to spend money on education and to invest in new infrastructure, and improve their quality of life.

The inequality of the system is exacerbated by the slow speed of growth and progress. This growth is determined in a large part by the speed and efficiency of our energy infrastructure.

With this low-efficiency rating, we’re not going to see any real progress...

If it’s so inefficient, you may ask, why do the capitalists maintain it? 

Simple. Even though it’s expensive and inefficient, they still make money. In fact, the inefficiency makes them more money in the end because they get to add on fees for storage and transportation, which are often passed on to the consumer.

So, this inefficient, costly status quo system works great for the capitalists, as you can see by the record profits posted by the fossil fuel industry. For everyone else whose wages have stagnated, expensive energy is a sentence to a lower quality of life, if not a literal death sentence. 

Which brings us to our next conversation.

Fossil fuels kill... kind of a lot.