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Peak Gold, Easier to Model than Peak Oil? - Part II

Luis de Sousa — Wed, 02 Dec 2009 10:13:24 -0400

This is the second installment of a guest post by Jean Laherrére on peak gold. The first part can be read here. This time Jean takes a macroscopic perspective on gold mining for the world as whole.

Note: This post contains 33 images amounting to 1.5 Mbytes of data.

World gold production

In Part I, we mentioned how uncertain past data is, in particular for the countries of the Former Soviet Union. Furthermore, gold producers try to inflate their discoveries to get higher stock markets values, even to the extent of fraud. A series of high profile resource stock scams took place in the 1990s, which culminated in the huge Bre-X scandal in 1995. Bre-X’s stock collapsed after its much-touted Busang gold project – thought at the time to contain more than 70-million ounces (2.1 kt) of gold - turned out to be a fraud; core samples from the drills had been tampered with and expertly “salted” with gold dust.

The world cumulative gold production has reached about 150 kt at the end of 2008 (151 kt according to Gavin Mudd and 161 kt according to USGS, which had too high an amount for FSU). USGS estimates remaining reserves at 50 kt and resources at 100 kt. We model the future for an ultimate of 250 kt.

The world population is also plotted and displays a good correlation with cumulative gold production.

Figure 50: World cumulative gold production & modelling for an ultimate of 250 kt

Gold production is reported to have started about 6000 years ago, but industrial production started around 1900. Gold cumulative production displays a real hockey stick!

Figure 51: World cumulative gold production since the beginning of gold discovery in -3900 and world population

Hubbert linearization (annual production over cumulative production percentage versus cumulative production) is often used to estimate the ultimate with a linear extrapolation, but this procedure only works if cumulative production follows a logistic curve (called the S curve). The world linearization graph is useless; no reliable linear extrapolation can be drawn, except that the last 10 years since 1998 could be extrapolated towards 240 kt.

Figure 52: World gold production Hubbert linearization

World gold annual production is plotted from different sources: USGS, Gavin Mudd, and goldsheetlinks. There is a large discrepancy during WWII and the cold war because of the overestimates by the CIA for the FSU. Gold price is also plotted with the drastic increases of 1980 and 2008.

Gold annual production peaked in 2000, and the decline is as steep as the increase despite the increase in gold price.

Figure 53: World gold annual production from different sources

The breakdown country by country can be seen clearly on the graph from the 2009 Erste Bank Special Report Gold, despite of the USSR collapse in 1960 being wrong, as previously described.

Figure 54: World gold annual production breakdown by country 1930-2008

Moorhead 2009 Newcrest has a similar graph for 1980-2008:

Figure 55: World gold annual production breakdown by country 1980-2008

World annual gold production is modelled with 7 cycles, but from 1800 (close to zero) to the 2000 peak the pattern looks like a simple bell-shape curve, despite several short bumps.

Figure 56: World gold annual production & modelling for an ultimate of 250 kt

Gold annual production and forecasts of the main producers are compared. If China is now the largest producer, South Africa could be back to that position in 2030 if its 58 kt ultimate is right. New producers will arrive if the world ultimate at 250 kt is right.

Figure 57: Gold annual production of the main producers in log scale

The same graph in normal scale:

Figure 58: Gold annual production of the main producers

World gold grade

It is very hard to find historical data on world gold mine grade. The best one I found is from
2009-07-02: Erste Bank Special Report GOLD. The graph starts in 2000 at 2.2 g/t and declines down to 1.1 g/t in the first quarter of 2009. It is confirmed by data from CIBC World Markets.

Figure 59: World gold mine grade 2000-2009

Estimation of reserves needs to assume an economic cutoff, which depends mainly upon the gold price and the mine set up (surface or deep mine). The gold cutoff was taken as 1 g/t a few years ago, but with the recent gold price increase it went down to 0.7 g/7 and now to 0.5 g/t. But in fact there is a little difference in reserve volume between cutoff at 0.5 g/t or 1 g/t, because the frequency of gold grade displays a pattern where 1-2 g/t seems more frequent than 0-1 g/t , as shown in this graph by Andean Resources Ltd [pdf!].

Figure 60: Gold grade frequency by Andean Resources Ltd

This graph surprises me because it disagrees with most fractal distributions I have seen. The frequency must be computed with the number of deposits and not by volume, and, of course, low-grade deposits are ignored; as well as gold in seawater.

Vann et al. in the 1995 article entitled Global resource estimation [pdf!] estimated reserves for a particular dseposit, where the difference between 1 g/t and 0 g/t is small.

Figure 61: Gold volume estimate versus gold grade frequency (Vann 1995)

Gold in seawater

Everyone agrees that gold in seawater represents a huge volume, but it is hard to get a consensus on the concentration (grade) and volume. The volume of the oceans is 1.3-1.5 billion km3 (10E18). Some attempts have been made to assess these figures:

The famous chemist Fritz Haber had heard that a ton of seawater contained 5/1000ths of a gram of gold or even more which meant the oceans could contain something like 8 million tons of it. Early sample tests were encouraging but not conclusive, so Haber and his assistants took about 5000 samples back to his Berlin laboratory. Alas the final result was that a ton of seawater only contained about 1/5000th of a gram. This was way too low to make it economically feasible to extract the gold. It was a crushing blow for Haber.

	Concentration 10E-12	volume kt	reserves kt
Haber		200	320
	11	14 300	42
Dartmouth University		600	8 000
Encarta		50 000	9 000 000
GoldFever		10	750

It is a mess!

However, recently, a high concentration of gold (15 g/t) was found in oceanic deposits close to black smokers. Production with copper is planned by a company (Nautilus). In this case it is difficult to estimate the total volume at this stage.

World gold exploration and budgets

In the Erste 2009 report, it is interesting to see that gold exploration budgets have sharply increased since 2003, but exploration budgets for 2009 are estimated to be down by 40%!

Figure 62: Gold exploration budgets from the Erste report

The discoveries in the western world (Owen Hegarty CEO G-Resources «Gold: the perfect metal» June 2009) peaked around the 1980s, but low discoveries around 2000 may be due to low exploration investments.

Figure 63: Gold discoveries in the western world 1950-2003

The Metals Economic Group says there were only been four world-class gold discoveries in the last 15 years. In fact, of all new discoveries, 75 % are made by the juniors.

Newcrest states that Gold discoveries are becoming rarer [pdf!]:

Figure 64: Gold discoveries 1992-2005 from Newcrest

Distribution of gold deposits

Peter Laznicka, 1999, Quantitative relationships among giant deposits of metals, Economic Geology V94 n04 gives the gold distribution from geological ages:

Figure 65: Gold giant deposits (number & tonnage) in geologic time from Laznicka

Laznicka has listed over 500 giant metal accumulations in a database called GIANTDEP that is not available on the web.

Robinson, 2007, The Spatial and Temporal Distribution of the Metal Mineralisation in Eastern Australia and the Relationship of the Observed Patterns to Giant Ore Deposits [pdf!] has a graph that is similar but slightly different despite being from the same source.

Figure 66: Number of gold giant deposits in geologic time from Robinson page 220

Figure 67: Number of gold giant deposits in geologic time from Robinson page 221

Laznicka‘s classification is 4 kt for a supergiant, 400 t for giant and 40 t for large deposit.

Figure 68: Classification of gold deposits, Robinson page 89

Unfortunately, no complete list of world gold deposit reserves is available on the web. We have to restrict our analysis to deposit production.

The fractal distribution of gold deposits annual production (deposit size versus rank of deposit in decreasing size order) is plotted from USGS 0FR 02 303 (table 11), world’s largest mines in 2001 and gold producers from gooldsheetlinks. The fractal distribution is parabolic like all natural objects (Laherrere 1996, Laherrere & Sornette 1998).

Figure 69: Fractal distribution of annual production per company & per mine

Fractal distribution is related to Pareto’s law: 80/20 (80% of the production comes from 20% of producers). The production of the 15 largest producers represents 51% of the world's production (goldsheetlinks rank per company for the last 12-month trailing production, August 2009).

World gold demand

Unlike oil, gold is mostly conserved, and demand can be much larger than mine production. The demand is mainly jewelry.

Figure 70: Gold demand from Erste report

The gold consumption pattern in 1999 (USGS –OFR-02-303-gold) shows that jewelry is the largest use, followed by electronics, then coins.

Figure 71: Gold consumption pattern in 1999

Mine supply provides the majority of the gold supply, followed by gold scrap and sales.

Figure 72: Gold supply 1980-2008

Official gold reserves

Gold reserves can either correspond to what is expected, from geological estimates, to be produced in mines, or the amount of gold in banks.

Figure 73: Official world gold « reserves » and main holders

Gold price

The price (London pm fix) of gold is displayed monthly in different currencies.

Figure 74: Monthly gold price in different currencies 1971-2009

The gold price is compared to the oil price and the wheat price in nominal dollars. Gold price tends to follow oil prices, whereas the wheat price (which depends on oil for fertilizers, pesticides and machinery), was very close to oil until 1973, but afterwards has become much less connected.

Figure 75: Gold, oil and wheat nominal price 1900-2008

Figure 76: Gold, oil and wheat nominal price 1900-2008 in log scale

Since 2007, the price of oil seems to depend upon the value of the dollar:

Figure 77: Oil price versus dollar value

The oil price seems to be correlated with the gold price since 1900, except during the 1979-2000 period:

Figure 78: Annual oil price versus gold price 1900-2008

But the monthly values for 2009 seems to depart from the previous trend: is it going to return?

Figure 79: Annual oil price versus gold price 1900-2008, and monthly May1978-September 2009

Erste Bank displays the gold over Dow ratio since 1900, with bursts and back to earth runs.

Figure 80: Dow Jones value over gold price ratio 1900-2008

Gold and oil annual production & forecast

The display of gold production and forecast for an ultimate of 250 kt is compared to oil (liquids) production and ultimates of 3 & 4 Tb.

Figure 81: Gold and oil (liquids) production & forecasts 1800-2200

Conclusions

Gold production has a longer history than oil production, but both are likely to reach a peak during this decade: 2001 for gold and 2008 for oil (in fact, it is going to be a bumpy plateau instead of a peak), and both will cease to be extracted before 2200. Yet oil will be gone, converted into heat and ashes, while gold will remain as jewelry and bullion.

Excluding soil and water, which allows us to grow our food, oil and gold must be the two most important minerals of our present civilization. Their production will span for only a few centuries, much less than the western civilisation's lifetime.

It is amazing to think that we are presently at a key epoch (peak or plateau) of our civilisation in terms of supply and we do not realize it. Paul Valery wrote in 1931 “the time of a limited world begins”, but many do not accept this fact, always wanting to consume more.

It is time to change our way of life.

The first part of this work can be found here.

Unique Times -- and the Future

Euan Mearns — Fri, 27 Nov 2009 10:34:12 -0400

This is a guest contribution by Dr Walter Youngquist, best known for GeoDestinies, his classic text on global resources and their depletion that was first published in 1997. I had the good fortune to meet Dr Youngquist at the ASPO conference in Houston two years ago and since then we have shared regular correspondence. Dr Youngquist (now aged 88) is updating GeoDestinies and last week he sent me this piece, seeking opinion. I always find his prose to be eloquent, simple, often understated and as a result very powerful.

I asked if we could publish this short piece on The Oil Drum and he kindly agreed. Many readers of The Oil Drum might feel that they already know much of what is written here, but you need to stop and ask how it is that we know what we know? When the new edition of GeoDestinies is published I'd warmly recommend this to Oil Drum readers as a well referenced, well written source spanning energy, soils, water, metals and population.

Unique Times -- and the future

In various contexts throughout this volume [GeoDestinies] it is pointed out that we now live in unique times, unlike any in the past, and unlike what any will be in the future. Yet many people in developed countries do not realize the unique years we have had since the beginning of the Industrial Revolution. This fact, as a framework to understand the present and what lies ahead cannot be overemphasized.

We have developed technology by which we have exploited the Earth’s resources to a degree never before seen and which, in the case of non-renewable resources – fossil fuels, and metals as well as nonmetals, can never be repeated. We have drawn both from the past, and also mortgaged the next few centuries at least by degrading the vital renewable resources of soil and freshwater, which are not renewable within the span of several lifetimes. This is in contrast to many centuries of history when, lacking technology of today, things changed very slowly.

All this has resulted in a seismic difference in prospects for future generations. We, in these industrial centuries, and those seeking now to industrialize, have left very little for those who will exist for the duration of the presumably million years of life of a typical mammalian species. We have done all this for enjoying (for some of us) a brief degree of affluence beyond anything ever before seen, and almost certainly will not happen again. Think about it as you drive your car to the supermarket with myriad varieties of food from far and near, or to the shops at the mall, on asphalt-paved roads in a vehicle most of which are powered by fossil fuel directly or indirectly.

The future of less will arrive for citizens of industrial and developing countries by small increments of change, but which, in retrospect will combine to be seen as a century of profound changes to a degree of rapidity and consequence as never before. We now live moment by moment, only moderately aware of these incremental changes. It is unlikely, although not impossible, that there will be catastrophic changes in lifestyles and economies. But slowly and inevitably the related problems of resource depletion and population growth will become increasingly apparent. We have the opportunity in various ways to modify the impact of these events, but so far there is little evidence this is being done. The industrial world and its political framework seems committed to the road of increased consumption and more people to consume, for that is what keeps the game going – for the moment, but is unsustainable very far into the future.

Walter Youngquist, November 2009

Peak Gold, Easier to Model than Peak Oil? - Part I

Luis de Sousa — Wed, 25 Nov 2009 10:25:49 -0400

This is a guest post by Jean Laherrère on gold. Although of little relevance to our economies in the present day, this precious metal has been used as money for many thousands of years, and still retains its importance and value. In a two part article, Jean analyses how gold mining is subject to depletion.

In this first installment, an assessment of reserves and a production model is presented for each of major gold-producing countries in the world.

Note: This post contains close to 50 images amounting to 2 Mbytes of data.

Preface
by Ugo Bardi

The question regarding the reasons for the "bell shaped" Hubbert Curve has been around for a long time. Is the curve something that is only associated with crude oil? Does it hold for all fossil fuels? Or is it characteristic of all non-renewable resources? With time, evidence has accumulated that the Hubbert Curve is a very general phenomenon that occurs for all cases where a resource is exploited in conditions of free or nearly free market. The curve is observed also for renewable resources, when the rate of production is much faster than the replacement rate. It is, however, a typical characteristic of non-renewable mineral resources.

In the case of energy resources, the Hubbert Curve is directly related to EROI or EROEI (energy return of energy invested). Declining values of the EREOI reduce the producers' profit and, eventually, lead to a reduction in investments on exploration and development. In the more general case of mineral resources, the curve is still related to energy but, in this case, to the increasing need of energy for exploiting progressively lower grade ores. The case of gold is especially interesting since it deals with a resource whose extraction rate would be expected to be dominated by market prices rather than energy constraints. Indeed, the historical gold production curve is best interpreted in terms of multiple production cycles, each one following a Hubbert Curve. Nevertheless, it is still possible to interpret the curve in terms of an overall Hubbert behaviour which, therefore, appears to be a nearly universal phenomenon in resource exploitation.

Introduction

Natural distributions (size versus rank) seem to follow the same fractal pattern (parabolic fractal) with galaxies, earthquakes, urban agglomerations and oil and gas reserves gathering in the same way (Laherrere 1996).

Mineral discoveries and production in sedimentary basins also seem to follow the same pattern, displaying several cycles trending towards an ultimate value. Production mimics discovery with a certain time lag, because what is produced needs to be discovered first.

However, production is limited both by above-ground and below-ground factors. The main below-ground limit is that the energy invested should be less than the energy returned, or EROI (Energy Return on Investment should be higher than 1). But EROI is very hard to estimate, except by converting expenditures for energy using assumed ratios.

Hall et al (Energies 2009-2 What is the minimum EROI that a sustainable society must have?) propose a minimum EROI (over 3?), when the real limit is 1 (except with subsidies!).

For long, I thought that gold production was different from fossil fuel production, because gold exploration has no energy limit, only cost. Gold concentration can vary largely. The contours are uncertain and the limit (cutoff) is an economic cutoff, whereas crude oil deposits are discrete and the concentration is either almost 100% (forgetting water produced with the oil) or 0%. However, oil supply (to satisfy oil demand) includes much more than crude oil or bitumen: natural gas liquids, refinery gains and other liquids from coal or biomass. Unconventional oil is more limited by the size of the tap (speed of extraction) than by the size of the tank (amount of resources).

Gold is extracted in mines at about 4000 meters deep, while coal reserves for instance are limited to about 1800 meters deep and onshore because of EROI constraints (waiting for a breakthrough on in situ gasification). But looking at the problems in South Africa (which for long was the main producer), it appears now that diminishing grade and high energy needs will set the limit. The world’s main gold mine is gold in the sea and no one is even thinking of that!

As a retired oil and gas explorer (geologist/geophysicist), I am very interested in minerals, but I know very little about gold mining. (I did try to pan for gold in Australia.) I have gathered all that I could find on the web, to present the main facts about the main producing countries.

I found that little reliable historical data exists. The main source of production information since 1933, on a country-by-country basis, seems to be the annual yearbooks of the USGS. Unfortunately, some of the amounts shown are not correct even in more recent editions, because past wrong estimates (especially for the FSU) were not corrected. Data for China is not considered as certain as the data from other countries. However, the USGS provides good maps of the country's gold mines.

I want to thank Gavin Mudd from Monash University Australia, who has done terrific work on gold. He has written excellent papers and provided me with historical values for most producing countries.

The site GoldSheetLinks provides gold production data since 1970 (though the data for Russia is wrong for the Soviet period) showing the main producers, which were in 2000 South Africa followed by US, and Australia in third place. But by 2008, the main producer was China with rising production, while South Africa, US and Australia are at the same level or declining.

Figure 1: Annual gold production from main producers from goldsheetlinks.

The same with the total on a log scale:

Figure 2: Annual gold production for main producers using a log scale.

As shown in the previous graph, South Africa was by far the largest producer, but it is not any more. First place was taken over by China, with Australia and the US producing as much as South Africa!

Let’s study the main producers:

South Africa

Gold occurs in many places in Africa:

Figure 3: Gold map of Africa

Gold mining in South Africa started around 1880, and the cumulative production has reached over 50 kt. It can be modelled with two cycles for an ultimate of 58 kt; leaving a yet to be produced figure of 8 kt, whereas USGS estimates the reserves (remaining reserves) at 6 kt and the reserve base (resources) at 30 kt.

Figure 4: South Africa cumulative gold production & modelling.

Annual gold production from South Africa is compared to the gold price and modelled with 4 cycles:

Figure 5: South Africa annual gold production & modelling.

Gold mine grade is a very important element of the economics of gold mining. The present linear trend of South Africa’s gold grade will reach zero around 2060, which makes our annual production forecast look optimistic with the 58 kt ultimate.

Figure 6: South Africa gold grade.

South Africa's gold grade decline could be sharper because deep mining consumes a lot of energy. US' gold decline is sharper.

Official gold «reserves» are in fact what is in the banks, and should not be confused with geological reserves (future production).

Figure 7: South Africa annual gold production and official «reserves» (in the banks)

Ghana (formerly Gold Coast)

Ghana has a long history of mineral production, and gold mining has been prominent in the economy of Ghana during the last 2000 years, using indigenous methods. Historically, this method for gold mining attracted Arab traders into the country and earned Ghana the name Gold Coast. Between the 14th and 19th century, the Gold Coast produced about 14 million ounces of gold using indigenous methods. Modern gold mining in Ghana essentially began with Frenchman Pierre Bonnat, the father of modern gold mining on the Gold Coast. In 1895, Ashanti Goldfields Corporation began working in the Obuasi district of Ghana, developing the Ashanti and other mines, which have produced the largest proportion of gold since 1900 in the countries of the Gold Coast.

The cumulative gold production reached 1.7 kt in 2008 and can be modelled for an ultimate of 3.5 to 4.5 kt (USGS remaining reserves being 1.6 kt and reserve base 2.7 kt).

Figure 8: Ghana cumulative production & modelling for an ultimate of 3.5 & 4.5 kt

Ghana's gold production should peak around 2015 at a level about 110 t/a.

Figure 9: Ghana annual production & modelling for an ultimate of 3.5 & 4.5 kt.

The US are famous for the gold rush of 1849 in California, but gold occurs in other places too.

Figure 10: US gold map.

Despite some production in the Appalachia as early as 1792, US gold cumulative production did not really take off until around 1850, and reached 17 kt at the end of 2007. The ultimate is estimated at 20 kt because the USGS reports remaining reserves at 3 kt, with resources at 5 kt.

Figure 11: US cumulative gold production and modelling for an ultimate of 20 kt.

US gold production has shown several peaks: 1852, 1915, 1940 and the last and largest in 1998. It seems unlikely that there will be another significant peak.

Figure 12: US annual gold production for an ultimate of 20 kt.

Gold production’s drastic decline is confirmed by the decline of gold grade.

Figure 13: US annual gold grade and linear extrapolation since 1980.

US gold grade was 10 g/t during the 1960s, and declined to 2 g/t in 1980. In the 1990s the average grade remained just above 1 g/t, which is close to the threshold for economic extraction. The extrapolation of grade since 1980 up to 1993 (last value) leads towards a zero grade around now.

The largest production figure since 1980 was in Nevada: Jon Price Nevada Bureau of mines and geology 2007 The world has changed: minerals in the 21st century [pdf!].

Figure 14: US annual gold production and Nevada contribution.

Canada

Figure 15: Canada and Latin America gold map.

Canada’s cumulative gold production reached 10 kt in 2008 and can be modelled with an ultimate of 12 kt (USGS reserves = 2 kt & reserve base 4 kt).

Figure 16: Canada cumulative gold production & modelling for an ultimate of 12 kt

Figure 17: Canada annual gold production and modelling for an ultimate of 12 kt

Canada’s gold grade trend from 1955 to 2004 can be extrapolated towards 2035, but only to 2010 using the last 12 years!

Figure 18: Canada gold grade.

Australia

The world's largest gold nugget was found in Australia (Victoria) in 1869 weighting 74 kg!

Figure 19: Australia gold map from www.ga.gov.au

Australia’s cumulative gold production was about 12 kt in 2008, and can be modelled for an ultimate of 17 kt (USGS estimates reserves at 5 kt and reserve base at 6 kt).

Figure 20: Australia cumulative gold production & modelling for an ultimate of 17 kt.

Australia’s gold production has peaked in 1997, and its decline will continue until about 2060 if the ultimate is 17 kt.

Figure 21: Australia annual gold production & modelling for an ultimate of 17 kt.

But since 1940, Australia’s gold grade decline seems to trend towards zero around 2035, meaning that the 17 kt ultimate from the USGS is too high! Australia’s gold grade is now at 2 g/t.

Figure 22: Australia gold grade

Brazil

Brazil's Gold Rush started in the 1690s, when the Bandeirantes discovered large gold deposits in the mountains of Minas Gerais [General Mines in Portuguese].

Brazil’s cumulative gold production is 3.4 kt in 2008 and can be modelled for an ultimate of 4 kt & 5 kt (USGS reserves = 2 kt and reserve base = 2.5 kt)

Figure 23: Brazil cumulative gold production and modelling for an ultimate of 4 kt & 5 kt

Brazil’s gold production peaked in 1990, and will decline until 2050 or 2100 depending on the ultimate.

Figure 24: Brazil annual gold production and modelling for an ultimate of 4 kt & 5 kt

Brazil’s gold grade has been declining since 1900 and can be extrapolated towards zero around 2050, which leads to consider the USGS reserve estimate as too high, only the 4 kt ultimate being likely.

Figure 25: Brazil gold grade.

Peru

Gold was produced long before the Spanish conquest, but data starts in 1491. Cumulative gold production was 2.3 kt in 2008 and modelled for an ultimate of 4 kt. USGS estimates for reserves were high in 2004 but dropped to 1.2 kt with a reserve base at 2.3 kt.

Figure 26: Peru cumulative gold production and modelling for an ultimate of 4 kt.

Peru’s gold production has peaked in 2005 and will decline until 2020.

Figure 27: Peru annual gold production and modelling for an ultimate of 4 kt.

Mexico

Historical gold production is hard to get before 1970 and cumulative production since then reaches 0.6 kt in 2008. USGS estimates reserves at 1.4 kt and the reserve base at 3.4 kt.

Figure 28: Mexico cumulative gold production and modelling for a remaining ultimate of 1.5 & 3 kt.

Mexico’s gold production should peak about 2020, at around 100 t/a!

Figure 29: Mexico annual gold production & modelling for a remaining ultimate of 1.5 & 3 kt.

Chile

Like Mexico, Chile’s gold production before 1970 is hard to get; since then cumulative production is 1 kt and can be modelled with a remaining ultimate of 2 or 3 kt (USGS reserves at 2 kt and reserve base at 3.4 kt).

Figure 30: Chile cumulative gold production and modelling for a remaining ultimate of 2 & 3 kt.

Chile’s gold production should peak around 2025 at 70 t/a.

Figure 31: Chile annual gold production and modelling for a remaining ultimate of 2 & 3 kt.

Russia

Russia’s gold industry started in 1745 around Ekaterinburg and in Siberia in 1823 (Korolenko 2004). Russia’s data was confidential during the Soviet period and CIA's (then USGS) reports were completely wrong. The most reliable source is the recent paper by Russian gold producer NBL CEO M. Leskov «Winning gold in Russia» International Mining May 2009.

Figure 32: Russia gold map from NBL International

Leskov was giving completely different data from the past CIA reports, but the following graph is hardly readable to keep data still confidential!

Figure 33: Russia annual gold production from Leskov, head of NBL

Comparing Leskov data (if correctly read) to previous sources shows that discrepancies were huge (more than double)!

Figure 34: Russia annual gold production from different sources

Different data sources are:

1. The USGS minerals yearbooks. In the 1963 report, USSR production is reported at more than 10 Moz since 1950.

Figure 35: Annual gold production from USGS minerals yearbook 1963.

In the 1964 report, USSR production is shown as less than 5 Moz from 1942 to 1963 in a new graph for the past, but most researchers kept the previously reported annual data, which was not corrected.

Figure 36: Annual gold production from USGS minerals yearbook 1964.

Figure 37: Annual gold production from USGS minerals yearbook 1980.

2. Robert G. Jensen, Theodore Shabad, Arthur W. Wright 1983 Soviet natural resources in the world economy.

3. Jon Price 2007 The world has changed: minerals in the 21st century [pdf!] Nevada Bureau of mines and geology.

Figure 38: percentage of annual gold production by country from Price showing an incorrect collapse of Russia production in 1961

4.Thomas Chaize and his site.

5.V. Korolenko 2004 Prospects for the Production and Processing of Gold in Russia.

6. R. Flynn Estimating Soviet gold production 1975.

Compiling and correcting all the data, the cumulative gold production is at 15 kt in 2008 and is modelled with an ultimate of 20 kt (USGS 2009 reserves = 5 kt and reserve base 7 kt).

Figure 39: Russia cumulative gold production and modelling for an ultimate of 20 kt.

Russia’s gold production should peak again around 2015 at 200 t/a and decline until 2060.

Figure 40: Russia annual gold production and modelling for an ultimate of 20 kt.

Uzbekistan

As for all USSR countries, gold data is unreliable before 1991. Uzbekistan’s gold production is reported to have started in 1970, but with no data from 1980 to 1991. Cumulative production is at 2.5 kt in 2008 and modelled for an ultimate of 4.3 kt (USGS reserves at 1.7 kt & reserve base at 1.9 kt).

Figure 41: Uzbekistan cumulative gold production and modelling for an ultimate of 4.3 kt.

Uzbekistan’s gold production has peaked in 1998 and could display a lower peak in 2012 with a decline until 2050:

Figure 42: Uzbekistan annual gold production and modelling for an ultimate of 4.3 kt.

China

There are many gold deposits in China:

Figure 43: China gold deposits map from USGS 2005-1294.

China’s gold production was low from 1930 to 1970, but before that it is unknown. Gold has been known in China since 1091 B.C. [pdf!] when little squares of gold were legalized in China as a form of money.

USGS estimates China remaining reserves at 1,2 kt with resources at 4 kt; cumulative production at end 2008 was 5 kt. China’s gold ultimate should be around 8 to 10 kt.

Figure 44: China cumulative gold production and modelling for an ultimate of 8 & 10 kt.

China’s annual gold production should peak between 2010 and 2015 and then decline sharply.

Figure 45: China annual gold production and modelling for an ultimate of 8 & 10 kt.

Indonesia

Indonesia’s gold production is unknown before 1970 and cumulative production is about 2 kt at the end of 2008. The USGS estimates remaining reserves at 3 kt (but 1.8 kt in 2006) with resources at 6 kt (2.8 kt in 2006).

Figure 46: Indonesia cumulative gold production and modelling for a remaining ultimate of 3 & 4 kt.

Assuming a cumulative production of 2 kt in 2008, the ultimate is estimated at 5 to 6 kt. Indonesia’s annual gold production has peaked in 2005 and should peak again at the same level around 2015-2020 and decline until 2050:

Figure 47: Indonesia annual gold production and modelling for an ultimate of 5 & 6 kt.

Papua New Guinea (PNG)

PNG’s cumulative gold production was at 1.6 kt in 2008 and is modelled for ultimates of 3 & 4 kt (USGS reports reserves at 1.3 kt and the reserve base at 2.3 kt).

Figure 48: PNG cumulative gold production and modelling for ultimates of 3 & 4 kt.

PNG’s annual gold production should peak during the 2010s and decline until 2050.

Figure 49: PNG annual gold production and modelling for an ultimate of 3 & 4 kt.

Synthesis of main producers

The data from the above graphs on highest peak and year, annual and cumulative production for 2008 and ultimates are gathered in the following table, and the subtotal of these 14 producers compared to the world figures. These 14 producers sum to 80% of the world's production in 2008 (as cumulative production) and 66% of the world’s ultimate value.

Country	Highest peak (t/a)	Peak year	ap 2008 (t/a)**	CP 2008 (kt)**	Ultimate (kt)
S. Africa	1000	1970	234	52	58
Russia	220	1939	174	15	20
US	366	1998	230	17	20
Australia	309	1998	225	12	17
Canada	175	1991	100	10	12
China	288	2008	288	5	9
Indonesia	167	2005	90	1,9	4,5
Uzbekistan	100	1998	85	2,5	4,3
Brazil	105	1980	40	3,4	4
Peru	207	2005	175	2,6	4
Ghana	84	2008	84	1,9	4
Chile	54	2000	42	1	3,5
PNG	74	2000	65	1,6	3,5
Mexico	41	2008	41	0,6	2
subtotal			1873	127	166
World	2600	2001	2356	160	250

* ap = annual production.
** CP = comulative production.

In the following installment, Jean will look at the World's perspectives as a whole.

Previously at TheOilDrum: Peak Minerals.

Carbon Capture and Storage

Euan Mearns — Tue, 24 Nov 2009 10:55:19 -0400

The Press and Journal (regional newspaper covering north Scotland and Aberdeen) had a headline story on carbon capture and storage (CCS) last week that inspired me to send a letter to the editor that was published today.

Striving to enhance oil recovery factors and prolong the life of the North Sea has significant merit. Using electricity to simply bury CO2 does not.

Full letter plus some additional information below the fold:

Sir, I would like to comment on your headline article of 19 November on carbon capture and storage (CCS) which did not make clear whether the scheme planned for Longannet is a pure CCS scheme or will also involve attempts to use the sequestered carbon dioxide (CO2) to enhance oil recovery from the North Sea. Let me explain.

In its purest form, CCS involves the capture of CO2 from the exhaust gas of a power station, transporting this via pipeline to the burial site where it is compressed and pumped underground. All this uses energy. In fact best estimates suggest about 20% of the electricity produced by the power station would be used for CCS, leaving the question what will the homes that would otherwise use that electricity do for heat and light? To frame this a different way, the average energy efficiency of UK coal fired plant is 37%. Adding on CCS will reduce the energy efficiency to 30% - at a time when improving energy efficiency is a top priority for all.

A modified version of CCS is to pump the CO2 into old oil fields where it can, given favourable conditions, mobilise residual oil that would otherwise be left in the ground. Producing this oil provides a revenue stream to pay for the whole process, but upon its combustion the oil adds a quantity of CO2 to the atmosphere that is about equal to the quantity that was initially buried, i.e. it is carbon neutral.

Striving to enhance oil recovery factors and prolong the life of the North Sea has significant merit. Using electricity to simply bury CO2 does not. It is important that the public, politicians and reporters have a clear understanding of the contrasting objectives of these two very different CCS strategies.

Dr Euan Mearns
University of Aberdeen
Editor The Oil Drum

And some additional background:

An alternative to CCS is to burn less coal. Combined heat and power (CHP) generation involves capturing the waste heat from power stations and pumping this hot water to neighbouring houses in district heating systems. Danish CHP plant is over 90% energy efficient.

UK energy imports are spiraling out of control, contributing to the destruction of our trade balance, spiraling foreign debt and the decline of the £. Pursuing pure CCS, without enhanced oil recovery (EOR), will make this dreadful situation worse. It is really time to question what has warped the thinking of UK energy strategy when confronted with such simple facts?

The UK government needs to make clear whether or not they will now abandon commitment to pure CCS in favor of the somewhat more rational CO2 EOR option.

At every turn, every strategy that is implemented must be aimed at improving (not destroying) energy efficiency.

Oilwatch Monthly November 2009

Rembrandt — Thu, 19 Nov 2009 10:18:26 -0400

The November 2009 edition of Oilwatch Monthly can be downloaded at this weblink (PDF, 1.24 MB, 33 pp).

Figure 1 - OECD Crude Oil & Product Stocks from January 2002 to September 2009

The Oilwatch Monthly is a newsletter that is available free of charge with the latest data on oil supply, demand, oil stocks, spare capacity and exports.

A summary and latest graphics below the fold.

Subscribe to receive Oilwatch Monthly by e-mail

Latest Developments:

1) Conventional crude production - Latest figures from the Energy Information Administration (EIA) show that crude oil production including lease condensates decreased by 21,000 b/d from July to August 2009, resulting in total production of crude oil including lease condensates of 72.50 million b/d. Crude oil production in the EIA International Petroleum Monthly for July 2009 was revised upward from 72.42 to 72.52 million b/d. The all time high production record of crude oil stands at 74.74 million b/d reached in July 2008.

2) Total liquid fuels production - In October 2009 world production of all liquid fuels increased by 630,000 barrels per day from September according to the latest fgures of the International Energy Agency (IEA), resulting in total world liquid fuels production of 85.61 million b/d. Liquids production for September 2009 was revised upwards in the IEA Oil Market Report of November from 84.92 to 84.98 million b/d. Average global liquid fuels production in 2009 up to October was 84.73 versus 86.6 and 85.32 million b/d in 2008 and 2007.

3) OPEC Production - Total liquid fuels production in OPEC countries increased by 250,000 b/d from September to October to a level of 34.25 million b/d. Average liquid fuels production in 2009 through October was 33.65 million b/d, versus 36.09 and 35.02 million b/d in 2008 and 2007 respectively. All time high production of OPEC liquid fuels stands at 36.58 million b/d reached in July 2008. Total crude oil production excluding lease condensates of the OPEC cartel increased by 110,000 b/d to a level of 28.94 million b/d, from September to October 2009, according to the latest available estimate of the IEA. Average crude oil production in 2009 through October was 28.64 million b/d, versus 31.43 and 30.37 million b/d in 2008 and 2007 respectively. OPEC natural gas liquids rincreased by 140,000 b/d from September to October 2009 at a level of 5.31 million b/d. Average OPEC natural gas liquids production in 2009 up to October was 5.02 million b/d, versus 4.66 and 4.55 million b/d in respectively 2008 and 2007.

4) Non-OPEC Production - Total liquid fuels production excluding biofuels in Non-OPEC countries increased by 380,000 b/d from September to October 2009, resulting in a production level of 49.69 million b/d according to the International Energy Agency. Average liquid fuels production in 2009 up to October was 49.52 million b/d, versus 49.32 and 49.34 million b/d in respectively 2008 and 2007. Total Non-OPEC crude oil production excluding lease condensates decreased by 167,000 b/d to a level of 41.46 million b/d, from July to August 2009, according to the latest available estimate of the EIA. Average crude oil production in 2009 up to August was 41.47 million b/d, versus 41.32 and 41.80 million b/d in respectively 2008 and 2007. Non-OPEC natural gas liquids production decreased by 48,000 from July to August to a level of 3.24 million b/d. Average Non-OPEC natural gas liquids production in 2009 through August was 3.37 million b/d, versus 3.65 and 3.79 million b/d in 2008 and 2007 respectively.

5) OECD Oil Consumption - No Update

6) Chinese & Indian liquids demand - No Update

7) OPEC spare capacity - According to the International Energy Agency total effective spare capacity (excluding Iraq, Venezuela and Nigeria) decreased from September to October 2009 by 430,000 b/d to a level of 5.2 million b/d. Of total October effective spare capacity Saudi Arabia can produce an additional 3.4 million b/d within 90 days, the United Arab Emirates 0.56 million b/d, Angola 0.19 million b/d, Iran 0.35 million b/d, Libya 0.22 million b/d, Qatar 0.12 million b/d, and the other remaining countries 0.36 million b/d.

Total OPEC spare production capacity in October 2009 increased by 60,000 b/d to a level of 3.97 million b/d from 3.91 million b/d in September according to the Energy Information Administration. Of total September spare capacity 2.80 million b/d is estimated to be from Saudi Arabia, 0.21 million b/d from Qatar, 0.16 million b/d from Angola, 0.30 million b/d from Kuwait, 0.30 million b/d from the United Arab Emirates, 0.10 million b/d from Iran, and 0.10 million b/d from other countries.

8) OECD oil stocks - Industrial inventories of crude oil in the OECD in September 2009 decreased to a level of 976 million from 986 million barrels in August according to the latest IEA statistics. Current OECD crude oil stocks are 15 million barrels higher than the five year average of 961 million barrels. In the October Oil Market Report of the IEA a total stock level of 985 million barrels was tabulated for August which has been revised upwards to 986 million barrels in the November edition. Industrial product stocks in the OECD in September 2009 increased to 1498 million from 1488 million barrels in August according to the latest IEA Statistics. Current OECD product stocks are 97 million barrels higher than the five year average of 1401 million barrels. In the October Oil Market Report of the IEA a total stock level of 1471 million barrels was tabulated for August which has been revised upwards to 1488 million barrels in the November edition.

Figure 2 - OPEC Crude Oil Production & Spare Capacity - International Energy Agency - January 2003 to October 2009.

Figure 3 - OPEC Crude Oil Production & Spare Capacity - Energy Information Administration -January 2003 to August 2009

Figure 4 - World Liquids Production from January 2002 to October 2009

Figure 5 - World crude oil production from January 2002 to August 2009

Figure 6 - OPEC Liquids Production from January 2002 to October 2009

Figure 7 - Non-OPEC liquids production from January 2002 to October 2009

Figure 8 - Non-OPEC Crude Oil production from January 2002 to August 2009

Some predictions on the forthcoming Russian-Ukrainian gas 'crisis'

Jerome a Paris — Tue, 17 Nov 2009 10:16:56 -0400

We've recently heard more veiled threats from Putin about Ukraine being unable to pay for gas (thus presumably leading to new attempts at cutting them off), which suggests that Russia is getting itself ready to start a new crisis. That means two things:

the internal infighting between groups of powerful Russian and Ukrainian oligarchs for the control of unofficial Russian gas deliveries to Ukraine (more on this below) is still not conclusively settled, and requires "action" using official levers of State and interference with Gazprom's export deliveries through Ukraine;

Russia thinks it stands a better chance to focus European blame on Ukraine and, even more importantly, to get Europeans to buy off the Ukrainians (thereby increasing the available unofficial gas loot for the players involved).

While Russia's actions are not easily understandable when considered as those of a country, they are much easier to interpret rationally when you look at who the actual players behind the scenes are. Conversely, public European reactions which sound logical are, in fact, incredibly naive if you know the industry a bit and, given that the people involved are certainly not naive, they are other things at stake.

So let's try to make some predictions and unravel what's actually going on.

Originally posted on European Tribune. See also my full series of articles on earlier episodes of the Russian-Ukrainian crises here

First, as a reminder, since 1994, there have been two separate bits in the Russian-Ukrainian gas trade:

the official part, whereby Gazprom delivers gas to Naftogaz (roughly 20-25bcm/y), the Ukrainian national gas company, and uses Naftogaz's network of pipelines for its gas exports to Europe (including Turkey) - roughly 130-150bcm/y of transit; this trade roughly balances itself out, ie is settled without any ash payments. Given that gas prices are more volatile than transit prices, Gazprom regularly tries to get paid something more for the gas it delivers, arguing that it has become worth more than the transit services, and Ukraine refuses to (or can't) pay. This is the public dispute, and it is, in reality, a sideshow;

the unofficial part, whereby semi-mysterious traders like RosUkrEnergo and its predecessors deliver gas to Ukrainian clients using Gazprom's pipelines but gas formally sourced elsewhere. As I have explained in detail in this paper for the IFRI research institute, this business was created by Gazprom managers, jointly with large Ukrainian gas consumers, to get around the impossibility for Gazprom to get paid by Naftogaz under the official trade: Ukrainian gas users get gas cheaper than if they bought if from Naftogas, and the suppliers get some money from gas deliveries from Gazprom's network to Ukraine; the initial customers can then on-sell more gas to other Ukrainian users and make additional money for them and their Russian accomplices. This is fundamentally an unstable business because (i) it has to be done in the shadows, as it goes directly against the interests of Naftogas, the national company, and it uses Gazprom's network at no benefit for the company, (ii) all the major Ukrainian gas users (mainly the big steel-bashing companies in the East) want to be the privileged intermediary that gets first access to the gas and a cut on further sales, (iii) various clans within Gazprom (and their associates in the Kremlin) want their hands on that juicy business. Amongst unavoidable players in this game, you thus have the big customers in Ukraine, the people with formal authority over gas transit both in Ukraine and in Russia, the people with access to gas inside Russia or in Central Asia, and their counterparts within Gazprom...

Fights on the second front can spill on the first front, as the two businesses largely use the same pipelines and gas inside the system is fully fungible.

The West's error has been to try to interpret what's going on in light purely of the first, public, conflict. Of course, one reason this happened was that in 2006, some players in the West had very strong motivations to suddenly make a big deal of what had been a recurring, and mostly ignored, conflict. The UK government was facing the very real prospects of gas cuts as domestic production was shrinking and inadequate plans for import and gas storage were in place; the Russian-Ukrainian gas crisis offered a perfect opportunity to turn a domestic policy failure into an international conflict, with blame nicely thrown at a familiar enemy. In parallel, the US administration had cooled on Putin following the takeover of the Russian oil industry by oligarchs unfriendly to the Western majors which he oversaw; that crisis was a perfect opportunity to paint him as a dictator bent on oppressing his neighbors, especially in the wake of the "colour" revolutions in Ukraine or Georgia. Once that interpretation was pushed unto an unsuspecting public, it took hold - and the Russians, focused on the behind-the-scenes conflict, did little to behave in ways that could have changed that perceptions.

That interpretation of the conflict also had the added benefit of make the US and UK look like the defenders of freedom and markets in Europe, against the weak and compromising French, German and Italians, too cowardly or corrupt to confront the Russians, and too busy coddling their national energy companies against from the "fair competition" of more nimble markets which would otherwise spontaneously create alternatives to Russian gas imports.

By 2009, it was obvious that things were not completely black and white, and the narrative of Russia imperialistically exercising the "energy weapon" against the plucky freedom-loving Ukrainians and other neighbors was not enough to explain things. Europeans, collectively, started taking a harder look at Ukraine's behavior - but they continued to focus almost exclusively on the first conflict, which was much easier to grasp. Russia decided to push its advantage, to push the blame on official Ukraine, and hopefully get Europe to finally pay them something for the gas delivered to Ukraine - thus the much longer cuts that took place in January, and what appeared to be a successful resolution through European loans to Ukraine. But of course, as I predicted then, Ukraine failed to meet the conditions to get that loan (which, contrary to the loans extracted from Russia, they'd actually have to repay), dumping the problem once again in Russia's lap.

Fundamentally, even with the new pipelines Russia is building, Ukraine has a stranglehold over Russia's exports, and can go on not paying for its official gas deliveries, effectively offsetting these with the transit service; and it should be noted that, even with variable prices for natural gas, this is not a bad deal for Gazprom (which know it). So while there is a lot of theater around the first conflict, and continued attempts to change the stable solution that has been reached, this is not an equilibrium likely to change, unless Russians and Ukrainians (which have a common interest there) somehow manage to make the European cough up some money along the way. Thus the continues crises, and the fearmongering about Russia's "energy weapon," which is basically encouraged by Russia to some extent as it seems to give them a bit more leverage and importance in the public eye.

The second conflict is much more intractable, much less subject to the restrictions of traditional diplomacy, and its players are likely to continue to use and abuse the instruments of State they control for their private purposes, thereby creating confusion for international onlookers.

So it is likely that further crises will erupt, and that gas deliveries to Europe will be temporarily shut down, typically in January.

Before going into predictions, an aside: gas consumption is very seasonal, with winter consumption typically double or triple summer levels, which means that quite a bit of storage capacity is needed to smooth out deliveries and ensure adequate supplies through the winter (deliveries in winter are often lower than demand). Most consumer countries - and in particular big importing countries - have significant buffers, and these are usually full at the beginning of the winter, ie when the crises happen. So, other than for a very small number of East European countries that have little storage and fully depend on Russian deliveries, Russian gas cuts have no impact whatsoever on actual gas availability for consumers in most countries, which can simply draw on their stored reserves a bit more than usual.

As a final point of background, and as I have argued many times before, electricity market deregulation in Europe has encouraged investment by players in gas-fired power plants, because they are the easiest and least risky to finance (given that electricity prices are largely driven by gas prices, as gas-fired plants are the marginal cost suppliers most of the time, gas-fired plants are almost always going to be in the market, or near enough, to be viable, as opposed to plants with high fixed costs like nuclear or wind which, unless they benefit from specific regulation, can find themselves making short term losses for longer than investors can afford, even if their long term average price is competitive). Over the past 10 years, Europe has built only two kinds of power plants: wind farms, thanks to the specific renewable energy rules, and gas-fired plants:

So, if one is worried about the gas supplies from Russia, there are two very simple steps fully under our control:

change power market regulation to eliminate its proven bias towards gas-fired power plants and limit the growth of European demand for gas, a large portion of which, in the long run, can only be supplied by Russia; pointing a finger at Russia's supposed "energy weapon" when one could very easily be less dependent on gas is a sign of incompetence or a distraction from the other priorities of such energy policies (which are, in fact, a jobs programme for City commodity traders, M&A advisors and associated parasites);

for countries that do not have sufficient gas storage capacity, urgently work on building these, or getting permanent access to friendly neighboring countries that may have more favorable locations available; lack of storage capacity may have been a valid excuse 15 years ago for many former Soviet Bloc countries which had built infrastructure predicated on Soviet deliveries, but today it should not wash - and blaming Russia for gas delivery cuts is, again, a distraction from incompetent domestic policies.

So, finally, my predictions:

there will be another gas crisis this winter as Russia senses European worries and tries to get the EU to send some money in Ukraine's way, for Russia's benefit;

Europe will, once again, ignore the real issue (that Ukraine and Russia have willfully created a parallel gas market, and that their politicians are more busy trying to grab a slice of the loot than to enact sensible energy policies, and will repeat the same tired angry platitudes about the need for Russia (and possibly Ukraine) to behave, and for Europe to be "unified" against this threat (the separate negotiations run by GdF, E.On and Snam will be called inefficient, when they are nothing but; the fact that all of Russia's pipelines go to Europe and they have no choice where to sell their gas will be under-emphasised; the very real protection brought by long term take-or-pay will be ignored - or even undermined)

there will be yet more calls for a better European gas market, for further energy deregulation (ignoring that this encourages gas consumption), and for a joint purchasing authority (see here for a recent exemple from a French politician who should know better), without any discussion of how that gas should be split, who should get the presumed (but imaginary, given that current price formulas are already market based) cost savings wrung out of Russia, and who will decide on allocation of shortages, if any;

expect shortages to appear again in selected East European countries (ie , in some cases, to be manufactured by local authorities in order to blame Russia), without any discussion of the reality of storage and the lack thereof, and conversely, dark accusations (augmented by London and Washington) about the insufficient lack of solidarity of Western Europe and its cowardice towards Russia, with associated calls for further European subsidies to build new connecting infrastructure (a not completely unreasonable idea) or new nuclear or coal-fired power plants;

Russia will play its accustomed role with its usual rigidity, alternating dark threats, accusations of unfairness from Europe, and shameless calls for Europe to pony up money; it will certainly not offer to sell its gas at Ukraine's border, which would dump the transit problem in Europe's hands, but eliminate the possibility of the second market to exist (Europe will not try to offer the same, as nobody is keen to take over Ukraine's gas infrastructure and its associated problems (underinvestment, corrupt managers at all levels, and a legacy of complex contracts to untangle));

Ukraine will be, as usual, completely confused, given that the 3 political forces that are fighting it out in Kiev de facto represent 3 of the oligarchic clans that are fighting for the loot. They WILL cut off Europe if Russia reduces deliveries, but otherwise, beyond expecting to get money from the outside, will do nothing to solve the issue or clarify it;

in the end, the crisis will come and go with no actual impact on the ground (other than temporary or manufactured ones in select countries), politicians and pundits will huff and puff and pontificate importantly, and will provide no actual solution, because none is needed for the important things (Europe does get all the Russian gas it wants), and none is available for the real loot-capture underneath, which is only to the detriment of Russian and Ukrainian citizens, but who cares about them?

The US stimulus and "green jobs" for wind energy

Jerome a Paris — Fri, 13 Nov 2009 10:26:39 -0400

Recently, there have been worried or angry or outraged articles in the blogosphere about the stimulus money going to help create jobs in Canada, China, or going into the pockets of foreign multinational companies.

I'd like to make a few comments on this.

This is part of my series on wind power.

One of the reasons US projects need to import foreign-manufactured turbines is that the US-based production capacity is currently equal to less than 2/3 of the overall US market for new installations. Just under 8,000MW will be installed this year, with a current manufacturing capacity of 5,500MW. Many manufacturers are investing to build new factories, but this will take time;
The main reason there is not enough manufacturing capacity is because the US has an appalling track record in supporting the industry: 3 times over the past decade, Congress allowed the main regulatory instrument, the PTC, to elapse, causing a catastrophic drop in installations:
This had global consequences - the disappearance of one quarter of the world market is not an easy event to deal with - and almost caused the bankruptcy of several turbines manufacturers (some were bought out). Ever since, manufacturers have probably undersized their investments, in order to be able to deal with such a potential drop in demand, and they mostly avoided the US as a production base as a result, even though there are serious logistical advantages in this (heavy) industry to be located near your market.
There is no secret: the only way to have manufacturing investment in an industry which needs no subsidies, but a specific regulatory framework is to have stable policies and, dare I say it, an industrial policy to promote both the wind industry (a good thing in itself) and the wind turbine manufacturing industry.
This is still missing, right now. States are doing this at the local level, but it would make a lot of sense to do it at the federal level.
One of the reasons why the early federal grants have gone to European companies is that they are amongst the main investors in the sector in the US (and globally) - because they are familiar with the sector, because they know how it works, because they have better access to the (artificially scarce) turbines, and are willing to invest in the US whenever it makes sense to do so. The sector is now a strategic activity for most big utilities in Europe, initially because they were forced by public authorities to invest, and now because they like the returns they get, and they have massive investment programmes at home and elsewhere. And the European suppliers are following them. Protectionism might choke that source of investment.
Additionally, a large part of the money being invested in the US wind sector actually comes from European banks. The industry has largely been financed by project finance (which is my job), and that is a lending activity and not a capital markets activity - thus it did not interest US investment banks. So European bank balance sheet money has poured into the US wind sector to the tune of many billion dollars per year over the last several years. The financial crisis disrupted this for a while, but the European banks are now back at it. Again, protectionism might be a double-edged sword.
Furthermore, a lot of the US-based solar manufacturing industry has come to life thanks to the generous tariffs provided in Germany and Spain for solar power: this help built the local industry, but significant amounts also went to manufacturers from around the world, including some large US players.
While the worriers note that 50% of the jobs in wind come from manufacturing, it is also true that the other 50% are local (installation and long term maintenance and by nature not offshoreable - these will stay for the long run (that's more jobs than when you buy oil or coal-fired electricity, in any case); separately, building wind power generation is a good thing per se, avoiding carbon emissions, reducing dependency on fossil fuels (while natural gas is plentiful this year, there are still plenty of long term worries) and offering a stable-priced long term generation capacity.

As Natasha Chart noted in her sensible article on the topic, there are a few things that can be done:

local content requirements (say, 30-50% of the investment) are legal, and legitimate, and can help build up the local infrastructure and industry;

but they will work only in the framework of stable policies that are long enough, and credibly so, and not subject to the whims of politicians too scared of "socialism" or "subsidies" to keep at it;

The reality is - you get what you want. You cannot have the creation of large scale manufacturing employment without, again, an industrial policy. If you can't own up to a concept that too many seem to see as "socialist," all you'll get will be haphazard results, benefitting those that do have consistent policies and the infrastructure that goes with it, who will be able to take advantage of semi-random bursts of public support dictated by urgency or short term political grandstanding rather than properly designed.

In other words, if you want large-scale renewable energy investment, you have to accept the reality of the market today (ie it is dominated by European companies, with the Chinese pushing in), and put in place the policies that will make it attractive to invest in the US for the long term.

The Future of Nuclear Energy: Facts and Fiction - Part IV: Energy from Breeder Reactors and from Fusion?

Francois Cellier — Tue, 10 Nov 2009 10:51:28 -0400

This is the fourth part of a four-part guest post by Dr. Michael Dittmar. Dr. Dittmar is a researcher with the Institute of Particle Physics of ETH Zurich, and he also works at CERN in Geneva.

The accumulated knowledge and the prospects for commercial energy production from fission breeder and fusion reactors are analyzed in this report.

The publicly available data from past experimental breeder reactors indicate that a large number of unsolved technological problems exist and that the amount of "created" fissile material, either from the U238 → Pu239 or from the Th232 → U233 cycle, is still far below the breeder requirements and optimistic theoretical expectations. Thus huge efforts, including many basic research questions with an uncertain outcome, are needed before a large commercial breeder prototype can be designed. Even if such efforts are undertaken by the technologically most advanced countries, it will take several decades before such a prototype can be constructed. We conclude therefore, that ideas about near-future commercial fission breeder reactors are nothing but wishful thinking.

We further postulate that, no matter how far into the future we may look, nuclear fusion as an energy source is even less probable than large-scale breeder reactors, for the accumulated knowledge on this subject is already sufficient to say that commercial fusion power will never become a reality.

(Links to 1^st, 2^nd, and 3^rd parts)

1. Introduction

Over one hundred years ago, physicists began to understand that a huge amount of energy could be obtained from mastering nuclear fusion and fission energies. For example, the production of only 1 kg of helium from hydrogen "liberates" a thermal energy of about 200 million kWh. In the sun, this fusion reaction transforms about 600 million tons of hydrogen into helium every second, thus liberating 4 × 10²⁶ Joules per second.

The understanding of nuclear physics and its technological applications proceeded with breathtaking speed. It took only seven years from the discovery of the neutron in 1931 to the observation of the neutron induced fission of uranium at the end of 1938. This was followed, on the 2^nd of December 1942, by a sustained nuclear chain reaction with a power of 0.5 Watt (and up to 200 Watt at a later time) by E. Fermi and his team in a laboratory located below the Chicago University football stadium [1]. The next steps in using nuclear energy were the explosions of the Hiroshima and Nagasaki fission bombs, on the 6^th and 9^th of August 1945, resulting in more than 100,000 deaths and the beginning of the nuclear arms race. Only a few years after the first fission bombs exploded, the USA and the Soviet Union had constructed hydrogen fusion bombs. These bombs were up to 1000 times more powerful than the Hiroshima fission bomb.

Also the peaceful application of nuclear fission energy advanced very quickly: by 1954, the thermal energy from a controlled fission chain reaction could be used to produce commercial electric energy [2]. During the next 30-40 years, a large number of commercial nuclear power plants were constructed in most industrialized countries.

The rapid scientific and technical success in bringing this form of power into the production of commercial energy was impressive. Many nuclear pioneers expected that nuclear fission and fusion would provide their grandchildren with cheap, clean, and essentially unlimited energy. In fact, these successes led most of us to a euphoric and blind belief in continuous scientific and technological progress.

In contrast to such dreams, nuclear fission energy nowadays is not cheap, and even the most optimistic nuclear fusion believers do not expect the first commercial fusion reactor prototype until after 2050. One observes further that nuclear fission energy has been stagnating for about ten years and that its relative share in the worldwide electric energy production has decreased from about 18% during the nineties to only 13.8% currently [3].

Furthermore, the average age of the existing nuclear power plants, the limitations of primary and secondary uranium resources as well as the problems related to nuclear proliferation and nuclear waste all lead to doubts about the prospects of the standard water moderated nuclear fission reactors. In fact, it seems clear at this point that as fossil-fuel energy production declines, sufficient energy to ensure the survival of our highly industrialized civilization cannot come from a rapid growth of nuclear fission energy of this sort.

The problem with the limited amount of economically producible uranium resources can theoretically be addressed with the mastering of the technology of nuclear fission breeder reactors. It is claimed that this technology could increase the amount of fissile material from uranium by a factor of 60-100 and much more if the thorium breeder cycle can be realized [4]. It is believed that breeder technology will enable us to bridge the time gap before nuclear fusion energy, which would become the "final solution" to all energy worries, can be mastered [5].

In this fourth and final part of the Future of Nuclear Energy report, we discuss the experience with past and current breeder reactors in Section 3. We analyze how the remaining problems will be addressed with the worldwide Generation IV breeder reactor program and with thorium based breeder reactors (Section 4). The remaining obstacles towards a controlled and sustained nuclear fusion reaction chain are presented in Section 5. In order to simplify the discussion, we start in Section 2 with some facts and basic physics principles of nuclear fission and fusion energies.

2. Energy from nuclear fission and fusion, some facts and physics

As we have discussed in detail in parts I-III of this report [6], the publicly available data on long term worldwide natural uranium supply are in conflict with even a moderate annual 1% growth rate for conventional water moderated reactors.

Consequently, believers in a bright future of nuclear energy should concentrate their efforts on either (i) the realization of nuclear fuel breeder technology based on the uranium cycle, U238 to PU239, and/or the thorium cycle, TH232 to U233, or (ii) the mastering of commercial nuclear fusion reaction. In this section, an overview of the existing and planned nuclear reactor types and the experience with fast breeder reactors (FBR) is given (2.1). This is followed by a basic summary of the most important principles relevant to the use of nuclear fission and fusion energies (2.2 to 2.4).

2.1. Some facts concerning existing and planned nuclear reactor types

The worldwide nuclear fission reactors produced 2601 TWhe during the year 2008, or roughly 14% of the worldwide electric energy.

For the year 2009, one finds that commercial nuclear energy production will come from 436 nuclear fission reactors with a combined nominal electric power of 370,260 GWe [7].

Table 1: The evolution of different reactor types and their corresponding electric power ratings from the IAEA/PRIS data base (October 2009) [7]. Another five reactors are listed in the "Long Term Shutdown" category, four of which are PHWR's and the fifth is the 0.25 GWe Monju sodium cooled FBR reactor in Japan.

The PRIS data base of the International Atomic Energy Administration (IAEA) shows that the dominant reactor type today including reactors that are currently under construction is the water moderated fission reactor type. The abbreviation PWR (PHWR) stands for pressurized (heavy) water reactor whereas BWR denotes the boiling water reactor. As can be seen from Table 1, these reactors provide over 94% of the nuclear fission power worldwide. The remaining 6% of the nuclear fission power comes from graphite moderated and water or gas cooled older and smaller reactors. It seems that the PWR type has won the competition for the existing reactors and for the next generation of reactors by a large margin.

One observes that only two FBR's are declared operational. A third FBR has been in a "long term shutdown phase" since 1995. The two operational FBR's contribute together 0.2% of the world nuclear power. This tiny contribution from FBR's today is even smaller than it used to be. In the list of 122 decommissioned reactors, one finds 6 FBR's with a combined power of 1.6 GWe, or 4.3%. In the list of 53 reactors (October 2009) currently under construction, one finds only two relatively small FBR's.

These numbers indicate not only that FBR's play a negligible role today and during the next 10 years, but also that their operation experience is far from being an economical and technological success story. Some more details on the worldwide experience with various types of commercial FBR and thorium fuel breeder reactors and their operation are listed below:

The best operation experience comes from the Russian BN-600 FBR reactor with a rated power of 0.56 GWe. This reactor has been operated commercially for 28 years and is scheduled to close in 2010 [8]. Its average energy availability is given as 73.79%. In a document from the IAEA fast reactor data base [9], one finds that this reactor would be better called a "Fast Reactor," as it was designed to use more fuel than it could produce. A new BN-800 reactor with 0.8 GWe is currently under construction in Russia, and its scheduled start is now given as 2014. Like its smaller "brother," it is designed to consume Pu239 rather than breed surplus fissile material.
The other "operating" FBR is the Phenix reactor in France. Phenix originally started operation with a power of 0.233 GWe in 1974. Since 1997, it is rated with 0.13 GWe only, and an energy availability factor of 60.23% is given for 2008. According to the WNA (World Nuclear Association) data base, it ceased power production in March 2009 and will continue being operated as a research reactor until October 2009 [10]. The larger Super Phenix reactor, with a power rating of 1.2 GWe, achieved a maximal energy availability of 32.6% only. This very low performance, in comparison to PWR's, was achieved during the last operational year (1996) after a very short lifetime of only 10 years.
The Monju reactor in Japan was closed after a serious sodium leak in 1995. For many years now, the reactor is scheduled to "restart the subsequent year." Perhaps this time, it will really restart during the first few months of 2010 [11].
A next generation FBR reactor is currently under construction in India. According to the current plans, it will start producing electric energy during the year 2011 [12].
The KNK II reactor in Germany is listed in the IAEA data base [9] with a tiny capacity of 0.017 GWe. During its operational lifetime, 1978 to 1991, it achieved an average energy availability factor of 23.65%. A larger FBR, the SNR-300, with a rated power of 0.3 GWe was completed in 1985, but for various reasons never started. A large 1.5 GWe FBR, the SNR-2, never completed even the design phase.
A limited experience with a thorium admixture in the nuclear fuel in commercial prototype reactors exists as well. A WNA document mentions two THTR's (Thorium High Temperature Reactors) [13]: one with 0.3 GWe in Germany, which operated commercially between 1986 and 1989; the second was the Fort St. Vrain reactor with a power rating of 0.33 GWe in the USA. It is listed as the only commercial thorium-fuelled nuclear plant, following closely the German design. It was operated between 1976-1989.
The WNA document mentions further that the experimental Shippingport reactor in the USA, with a power rating of 0.06 GWe, has successfully demonstrated the concept of a Light Water Breeder Reactor (LWBR) using thorium. The Shippingport reactor began commercial electricity production in December 1957. In 1965, the Atomic Energy Commission started designing the uranium-233 / thorium core for the reactor. The reactor was operated as a LWBR between August 1977 and October 1982.

Several countries have so far managed to construct GWe water moderated slow neutron reactors, mostly of the PWR type. These reactors were operated safely and efficiently for many years, using U235 fuel enriched to 3-4%.

In contrast, large breeder reactors, based on a large amount of initial fissile material and the transformation of U238 and Th232 for breeding new reactor fuel, have so far not even successfully passed a prototype phase.

2.2. Energy from nuclear fission and fusion, some basics

Atoms consist of a nucleus, made of protons and neutrons, and electrons. The size and the chemical properties of atoms are defined by the number of electrons surrounding the nucleus. The combined mass of the protons and neutrons, each 2000 times heavier than the electrons, defines roughly the mass of the atoms. As the nucleus is 100,000 times smaller than the atom, it follows that its mass density is huge in comparison with that of the atom. The same chemical characteristics can be expected for atoms with a fixed number of protons and with different numbers of neutrons, and the energy in chemical reactions is of the order of 1 eV (1.6 × 10^-19 Joule). As the nuclear properties of an atom depend on the number of neutrons, the name isotope has been introduced to separate the chemically identical atoms according to their numbers of neutrons.

Without going into details, it is known today that the energy source of the sun and other stars is nuclear fusion. This fusion starts from the large number of hydrogen atoms present in the sun. The fusion reaction in stars is possible because of the enormous gravitational pressure that overcomes the electric repulsive force between positively charged protons. Fusion is the source of all heavier elements that were formed in super-novae explosions of super large early stars and shortly after the big bang. For our subsequent discussions on nuclear fusion, it is important to note that a relatively low fusion power density of about 0.3 Watt/m³, is found in the sun [14]. In contrast, the power density envisaged for a hypothetical fusion reactor must be at least one million times larger.

The nucleus is bound by the very strong nuclear force, which acts against the repulsive electrostatic force of the protons. Measurements have shown that the mass of the various atoms is almost 1% smaller than the mass of the individual protons and neutrons combined. Following Einstein's famous E = mc² formula, this mass defect corresponds to a huge amount of energy, about 8 MeV (8 million eV) per nucleon. This energy is liberated when one manages to fusion different nucleons together. Starting from the different hydrogen isotopes, e.g. one proton, deuterium (one proton plus one neutron), and tritium (one proton plus two neutrons), a binding energy of up to a few MeV is found. Further fusion of these hydrogen isotopes into the helium nucleus liberates another roughly 20 MeV.

Neutrons and protons in heavy atoms, such as uranium, are less strongly bound than in lighter atoms, such as iron, and energy can be released in the fission of such heavy atoms. For example, 1 MeV per nucleon, or 200 MeV in total, will be liberated in the fission processes of U233, U235, and U238, each containing 92 protons and 141, 143, and 146 neutrons, respectively. The energy liberated per fission reaction is at least 100 million times larger than in a chemical reaction.

It is therefore not surprising that this has created an enormous interest in subatomic physics and its application for ultimate weapons and/or for the commercial use of energy.

2.2.1. Civilian and military use of nuclear energy, some remarks

The focus of this report is the commercial use of nuclear energy. As the evolution of nuclear energy has always been strongly coupled with the military sector, we feel that a few remarks about the dangers of nuclear weapons and the ambiguity of the commercial use of nuclear energy are needed. First of all, governments wishing to have nuclear weapons were not faced with unsolvable problems related to the development of fission bombs based on Pu239 and U235. This is especially true if nuclear physics and engineering knowhow had been built up under the umbrella of peaceful and commercial use of nuclear fission energy.

Furthermore, it is interesting to notice that advocates of nuclear fission energy like to explain why the dangers from nuclear weapons are far less alarming than believed. This is usually followed by the statement that their praised future nuclear energy technology will avoid proliferation problems. A similar appeasement in their argumentation is found with respect to safety and radiation issues. The existing nuclear power plants are claimed to be very safe, and risks are small compared to many other dangers of modern life. Yet, when their favorite future nuclear energy system is being introduced, it is always pointed out that it further reduces the remaining risks by a large factor.

For example it is often argued that U233 produced in a future Th232 breeding cycle will be useless for nuclear weapons. This argument is certainly flawed as countries who want to have nuclear weapon capability will most likely choose the simpler way to make a bomb using Pu239 or U235. Yet, those who know how to breed and separate hundreds of kg's of U233 can easily replace Th232 with U238 and produce a few tens of kg's of Pu239, sufficient to construct a few nuclear bombs.

Those not yet convinced of the mutual support of peaceful and military applications of nuclear energy technology should rethink their positions with respect to the Nuclear Proliferation Treaty, the NPT, and to the so-called "evil" government of Iran.

A careful reading of the treaty [15] reveals that Iran, at least so far, is in agreement with the NPT obligations. However one finds that NPT member countries should not exchange nuclear knowledge with nuclear weapon countries outside the treaty. It is also worth remembering that the official nuclear weapon states, Russia, USA, UK, France, and China, have declared in the treaty their intention to eliminate nuclear weapons as quickly as possible. Almost forty years after these countries signed the NPT, they still have more than 20,000 nuclear warheads.

The nuclear arms race at the end of the second world war and during the subsequent cold war is well documented in many reports, books, and movies, and we refer to the extensive literature largely available now on the internet. Especially for those who are not yet convinced about the dangers of nuclear weapons, we would like to recommend the short you-tube video on the largest explosion ever, the 60 Megaton hydrogen bomb in Siberia in 1961 [16] and to Stanley Kubric's masterpiece movie "Dr. Strangelove, or how I learned to stop worrying and love the bomb" from 1964 [17]. This film, even though almost 50 years old, presents many still relevant ideas related to the 20,000 remaining nuclear warheads.

2.3. Liberating the energy from nuclear fission and fusion

As we have seen in the previous section, a large amount of energy per reaction can be liberated from the fusion of light elements and from the fission of heavy elements like uranium. However at least two additional conditions must be satisfied before such a process can be considered for energy production.

In order to obtain a useful amount of energy from nuclear reactions, a continuous and controllable fission or fusion must be achieved for a large number of atoms. For example 10²⁰ U235 atoms, i.e., 0.05 gr, the amount of U235 found in 6 gr of natural uranium, need to be split every second in a 1 GWe nuclear fission reactor.
Enough raw material must be continuously available to sustain this chain reaction.

Only three relevant isotopes satisfy these conditions for the nuclear fission process. These are the two uranium isotopes U235 and U233 and the plutonium isotope Pu239. The energy liberated in the fission process is carried dominantly (about 80%) by the two daughter atoms. This energy is relatively easily transferred to a liquid or gas, and the heat can be used to operate a generator.

The chain reaction is possible as each neutron induced fission reaction produces on average between 2-3 neutrons. As one neutron is needed to initiate another fission reaction, 1-2 excess neutrons minus some inevitable losses are in principle available to increase the reactor power or perhaps to start a nuclear fuel breeding process. The introduction of neutron absorbers allows to control the reactivity of the nuclear reaction and thus to increase or decrease the reactor power.

As we have seen in Section 2.1, most of the large scale nuclear power plants of today are of the PWR (pressurized water reactor) type. They use dominantly U235 as primary reactor fuel. In these reactors, the prompt fission neutrons, with kinetic energies of 1 MeV, are slowed down (moderated) by elastic collisions with the hydrogen nuclei in the water molecules to subeV kinetic energies. The nuclear fission probability with such slow neutrons is increased by a factor of up to several hundred. As a consequence, a large reactor can be efficiently operated and controlled with a relatively low initial enrichment of U235, and large scale power production with moderated neutrons has been mastered by many countries. The combined running experience of such large scale reactors, currently more than 13,000 years, has resulted in stable electric energy production combined with small or negligible risks during regular operation up to an electric power output of more than 1 GWe.

In contrast, the neutron escape rate in smaller reactors and in unmoderated fast reactors is much higher. Therefore, a chain reaction in FBR's with comparable reactor power is more difficult to control, and a larger amount of initial fissile material with a higher density is needed. One consequence is that the required technology to make such highly enriched nuclear fuel will always be faced with the problem of its dual use for bomb making.

The use of the excess neutrons for the transformation of the U238 and Th232 isotopes into fissile Pu239 and U233 looks very promissing, as the amount of fissile material could be increased theoretically by a factor of more than one hundred. The breeding reactions considered would use the excess neutrons according the two reactions:

Some advantages and disadvantages for the U238 → Pu239 and the Th232 → U233 breeding cycles and some practical problems are listed in Table 2. Some of these problems and their proposed solutions will be discussed in detail in Sections 3 and 4 of this report. So far only little or no experience exists with large scale GWe breeder prototypes.

Table 2: A qualitative comparison of the fissile breeding cycles with U238 and Th232. The breeding gain is defined as the ratio of (C-D)/F, where C, D, and F are the numbers of fissile atoms created, destroyed, and fissioned. In order to be called a breeder, more fissile material must be created than fissioned, and the breeding gain must be larger than zero. The “(?)” indicates guestimates, as good information has so far not been found by the author.

We now turn to the fusion process. Nuclear fusion can happen, once the short range nuclear force between nucleons becomes larger than the electrostatic repulsive force between two positively charged nuclei. This can happen if the protons involved either have large kinetic energies or if the protons are compressed by super large gravitational fields as observed in stars. Very high kinetic energies correspond to nucleus temperatures of several tens to hundred million degrees. Such high kinetic energies can be obtained for example in accelerators but only for small numbers. Larger amounts of fusion reactions can be obtained in special magnetic field arrangements.

It follows from first principles that the sometimes discussed "cold fusion" reaction is in contradiction with well established knowledge of subatomic physics. As the repulsive force increases with the number of protons involved, the conditions to achieve fusion with atoms heavier than hydrogen and its isotopes become more and more difficult. It follows that fusion reactions based for example on the "proton-boron" reaction and many others are only possible using accelerators. Ideas to use accelerators for continuous fusion reactions with commercially interesting GW power prove to be wishful thinking once the required amount of 10²¹ fusion reactions per second is considered. The very low efficiency for transforming electric energy into kinetic energy of proton beams poses another fundamental problem for such exotic ideas.

The probability of a fusion reaction depends on the product of the plasma temperature and the fusion reaction cross-section. The deuterium-tritium fusion is a factor of 100 to 1000 easier to achieve than the next two fusion reactions of deuterium and He³₂ and deuterium-deuterium, respectively. As it is already extremely difficult to achieve even the lowest interesting plasma temperatures on the required large scale, it follows that the only possible fusion reaction under reactor conditions is the deuterium-tritium fusion into helium (He⁴₂).

An additional advantage of this reaction is the fact that the produced additional neutron carries 14 MeV of the liberated energy of almost 18 MeV per fusion reaction out of the plasma zone. Thus in theory, it can be imagined that the 4 MeV carried by the helium nucleus are used to keep the plasma temperature high enough, and that the neutron energy is transferred somehow to another cooling medium. This medium is imagined to transfer the heat to a generator.

Unfortunately tritium is unstable; its half life is only 12.3 years; and it does not exist in sizable amounts on our planet. It must therefore be produced in a breeding process. A possible chain reaction could follow the scheme:

In comparison to the breeding and energy extraction in fission reactions, at least three additional fundamental problems can be identified for the fusion process:

A sustained super high temperature, at least 10 million degrees, is required in order to have fusion reactions happening at an interesting rate. Such high temperatures can be achieved in some special magnetic field arrangements or in a tiny volume with very intense laser or particle beams. Unfortunately, no material is known that can survive the intense neutron flux under sustained reactor conditions and the sometimes occurring plasma eruptions.
It is difficult to transfer the energy from the 14 MeV neutron to a gas or a liquid without neutron losses.
The considered breeding reaction requires essentially that 100% of the produced neutrons must be used to make tritium. As this is even theoretically impossible, some additional nuclear reactions are proposed where heavier nucleons act as neutron multipliers. However so far, even the most optimistic and idealized theoretical calculations have failed to produce neutrons in sufficient numbers.

In short, the accumulated knowledge today indicates that the proposed fusion reaction is unsustainable and cannot lead to a sustainable power production. This statement will be corroborated with more details in Section 5.

2.4. Dangers related to radioactive material

We will conclude this section with some issues related to radioactive elements produced and liberated in the use of nuclear energy and the related dangers from ionizing radiation. First of all, there are three types of radioactive decays, producing α, β, and γ radiation. In addition, cosmic rays and various particles produced in high energy physics experiments should also be considered as a potential radiation hazard.

The damage to cells is related to the ionizing potential or the energy deposit per volume originating from a source. The hazard is usually split into high and low radiation dose effects. Very high radiation dose and the corresponding energy deposit result in fast cell death. If large and concentrated enough, the result can be the destruction of vital organs and death. It is important to know that the careless use of radiation during the early days of nuclear physics and its applications have resulted in relatively high cancer rates among the participating scientists and engineers [18].

The more tricky and less well understood damage comes from small dose and long-term effects to the cell DNA. While some self-repair mechanism to broken DNA exists, it is also known that a single unlucky hit by a cosmic ray can transform the normal DNA into a cancer developing DNA, resulting in the death of the host many years later. It follows that the importance of small radiation doses for the development of a particular cancer type and in comparison to many other causes like smoking and asbestos is difficult to quantify. As a result, the associated cancer risks from small radiation doses will continue to fuel the emotional debate about nuclear energy for a long time.

Despite these uncertainties, today the precautionary principle is used in many countries, and very strict rules for people working in a radiation environment are applied. These rules are often summarized under the name ALARA (as low as reasonably achievable). The goal to reduce any radiation exposure to essentially negligible levels is one of the most important occupations of a radiation safety group. As a result of these efforts, assuming that expensive protection measures are taken, the health risks from radioactive contamination under "normal operation conditions" are often much smaller than risks associated with working hazards in many other industrial domains. However, time pressure and profit optimization will always be in competition with ever more strengthened safety regulations.

It is also evident that it is essentially impossible to guarantee "normal operation" of the nuclear industry with its accumulating waste over periods of hundreds of years. A solution to these problems is, as with other similar long-term problems of our industrial growth-based societies, left for future generations.

3. Experience with real breeder reactors

Breeder reactors are based on the idea that only one neutron, out of the 2.5 neutrons on average from the fission of U235 and U233 (and 2.9 neutrons from Pu239), is required to keep the chain reaction going. It can thus be imagined, even if some neutron losses are allowed, that the additional neutrons can be used to make more nuclear fuel from U238 or Th232 than fissioned. Accordingly, a reactor is defined as a breeder reactor if more fissile material is produced than consumed.

The number of free neutrons per fission reaction is η = (σ_f/σ_a) × v, where σ_f is the neutron induced fission cross-section, and σ_a the neutron absorption (the sum of the neutron capture and fission) cross-section, and v is the average number of prompt fission neutrons [19]. The fission to capture ratio and thus η depend on the neutron energy and the different possible isotopes. As one neutron is required to sustain the chain reaction, breeding is only possible if η is larger than 2. This condition is found for Pu239, U235, and U233 fission, where η for prompt fast fission neutrons is 2.7, 2.3, and 2.45, respectively. For thermal (moderated) neutrons, U233 has the highest η value of 2.3, followed by 2.11 for Pu239, and 2.07 for U235.

Some Pu239 fuel production happens also in standard PWR reactors. Depending on the reactor and fuel design characteristics as well as the amount of remaining fissile fuel in the reactor, up to 30% and more of the produced energy comes from the secondary Pu239 fission.

Two theoretical breeder options exist:

The use of thermal neutrons and Th232 as input breeding material.
The use of fast prompt neutrons dominantly from Pu239 fission, thus the name fast reactor, with U238 as the breeding material.

The use of the Th232 → U233 cycle seems, at least on a first glance, more attractive. The reaction can occur in the high fission cross-section domain using moderated neutrons. The fission process with moderated neutrons is well understood, relatively easy to control, and already in use with the standard nuclear water moderated reactors. It seems that in principle one only needs sufficient amounts of U233 mixed with Th232 in order to keep such a reactor operating. Some of the remaining technical obstacles will be discussed in Section 4.4.

For the U238 → Pu239 breeder cycle, one has to operate the fission process, either starting with U235 or Pu239, in the low fission cross-section domain. As a consequence, such reactors have to be operated with highly enriched U235 (HEU) or Pu239 fuels. Thus, one is not only confronted with special safety conditions for a large amount of bomb making material, but also with a huge amount of ﬁssile material that could under certain conditions reach the critical mass resulting in an uncontrolled chain reaction followed by a nuclear meltdown. Furthermore, the cooling of the active reactor zone has to be done with a low neutron absorption cross-section and a high thermal conducting material like liquid sodium. Unfortunately, sodium is chemically very active and can easily burn in contact with oxygen.

3.1. The Shippingport LWBR thorium reactor

The experience with the thorium breeder cycle comes mainly from research at the US Shippingport reactor, rated with a net power of 0.06 GWe. This reactor operated during the 60s, 70s, and 80s. In 1965, the Atomic Energy Commission started designing the uranium-233 / thorium core for the reactor. The reactor was operated as a LWBR between August 1977 and October 1982.

According to the documentation, the reactor was started with a highly enriched 98% U233 inventory of 501 kg and a total of 42,260 kg of Th232 [20]. No details are given about the origin of the 501 kg of U233. However, one can assume that it came from a standard U235 fission reactor, where excess neutrons can be used to transform Th232 (or U238) blankets into U233 (or Pu239).

The reactor had a maximum thermal power of 0.2366 MW (therm) and was operated for 29,047 effective full hours, or about 66% of the time. After five years of operation, a very detailed analysis of the fuel elements was performed. It was found that the total U233 inventory had increased to 507.5 kg, a factor of 1.013. While it is impressive that the reactor could be operated and fueled with Th232 over a period of 5 years, the U233 gain was only about 6 kg of fissile material.

Assuming that such a reactor is supposed to eventually produce the U233 starting fuel for another reactor, it will take a long time before the second package of initial reactor core has been produced. Significant technological breakthroughs are required before this chain can be called feasible on a large scale.

The documents do not say much about the contamination of the 507.5 kg of U233 with fission products and its usefulness for further studies after this five year experiment. The fact that no subsequent reactor experiment has been performed might provide a partial answer to this question.

Furthermore, it is interesting to note that the initial concentration of fissile material in a reactor with only 0.237 GW (therm) energy was very large. It can be estimated that this amount, placed in a standard PWR, could have produced at least 5 times more electric energy than it had during the actual experiment.

In contrast to the experiments performed at the Shippingport reactor, where the initial core was already U233, a realistic Th232 reactor cycle must be started with an initial U235 or Pu239 core. Consequently, the experience gained with the Shippingport reactor experiment cannot be considered as a proof that the envisaged system can function. It follows that many more tests are needed, before a functioning large-scale prototype Th232 breeder reactor can be constructed.

3.2. Experience with fast reactors

For the purpose of this report, concerning the future of nuclear energy, we are mainly interested in the situation with the most important aspect, the question of the fuel breeding option. Unfortunately very little information is provided for the experimental breeding achievements, and most reports present the theoretical design breeding ratios. For example the breeding ratio for the FBR Phenix reactor in France is given in many textbooks as 1.14 [21]. This number corresponds however to the theoretical design, and it seems that a detailed experimental analysis, like the one done for the Th232 to U233 cycle and the Shippingport reactor, is either secret or has not been performed.

Despite the missing experimental data of achieved breeding gains, the IAEA document [22] about the FBR core characteristics provides useful information about the design of such reactors. In this document, a large number of FBR reactors, separated into (1) experimental fast reactors, (2) demonstration of prototype fast reactors, and (3) reactors of commercial size, are presented.

The breeding gain, defined as the ratio of (C-D)/F, where C, D, and F are the number of fissile atoms created, destroyed, and fissioned, and other characteristics of different fast reactors are summarized in Table 3.

Table 3: Some design values for the three groups of fast reactors, experimental, demonstration or prototype, and commercial size [22]. Reactors marked with a "*" are currently under construction. The design numbers can be compared with the ones of existing large commercial 1 GWe PWR reactors, assuming an average charge of 500 tons of natural equivalent, given in the last line. The "**" and "***" stand for a mixture of different plutonium isotopes dominated by Pu239 and the amount within the initial core, respectively.

It is very unfortunate that experimental breeding gains are not given in the IAEA fast reactor data base. In absence of any detailed publication, one can assume that the required detailed and very expensive isotope analysis of the reactor fuel has not been performed or published. The theoretical hopes for fuel breeding are thus not backed up with hard experimental data. Nevertheless, already the theoretical breeding gains of the different FBR's are revealing. Ten out of the twelve small experimental reactors were operated in a configuration not for breeding. The other two experimental reactors, listed in Table 3, are the Joyo in Japan and the Fermi in the USA. The Joyo reactor was not designed for the production of electric energy. The Fermi reactor operated for a few years and had a partial core meltdown in 1966. This reactor was the first and only effort in the USA to operate a larger scale breeder reactor and was terminated in 1972.

Another twelve demonstration or prototype reactors are listed in the IAEA report. Among them are the Monju reactor in Japan, the "Russian/Soviet" BN-600, and the Phenix reactor in France.

Only the BN-600 reactor is currently operational and is often considered as the prime example of a successfully operating FBR reactor. However, the IAEA document reveals that this reactor was designed with a negative breeding gain of -0.15.

In comparison, the Phenix and Monju reactors are presented with theoretical breeding gains of 0.16 and 0.2, respectively. It is interesting to note that the potentially better constructed next generation PFBR reactor in India, currently expected to start in 2011, is given with a much smaller theoretical breeding gain of only 0.05.

The third FBR group in the IAEA document describes commercial size reactors. Eleven out of the listed thirteen large FBR projects have been abandoned before any construction plans have been presented, or exist currently only in the design phase. Only one reactor, the Super Phenix reactor in France, has produced some electric energy. During its short operation time, it was operated with a very low efficiency and cannot be considered as a successful breeder prototype. A new commercial size fast reactor is under construction in Russia. The BN-800 is currently scheduled to become operational during the year 2014. It is however quantified with a negative breeding gain of -0.02.

A further confirmation that the BN-800 reactor is not a breeder comes from a WNA document [23], where the reactor is described as:

"It has improved features including fuel flexibility - U+Pu nitride, MOX, or metal, and with breeding ratio up to 1.3. However, during the plutonium disposition campaign it will be operated with a breeding ratio of less than one."

A possible interpretation of this statement could be that plutonium stocks are already a delicate problem and that Russia wants to get rid of them.

In summary, the IAEA data base for fast reactors does not present any evidence that a positive breeding gain has been obtained with past and present FBR reactors. On the contrary, the presented data indicate at best that a more efficient nuclear fuel use than in standard PWR reactors can be achieved during normal running conditions. However, once the short and inefficient running times of FBR's, in comparison with large scale PWR's, are taken into account, even this better fuel use has not been demonstrated. In fact, the required initial fuel load in FBR's contains at least twice as much natural uranium equivalent and with a fissile material enrichment that is roughly 5 times larger than that in a comparable PWR. A fair comparison of the fuel efficiency should include the efficiency to recycle fissile material from used nuclear fuel in both reactor types.

Three more areas of concern for a future breeder program should be added:

Fast reactors are known for their worrying safety record. For example, it might be true that serious incidents, like the one that happened with the Chernobyl graphite moderated reactor, cannot happen with modern PWR's. However, only very few nuclear experts would agree to such a statement for sodium cooled FBR's.
FBR’s are known for their huge construction costs relative to PWR's, and it might be tempting to compare some of the past FBR's to a monetary "black hole." An equivalent of 3.5 billion Euros has been invested in the construction of the SNR-300 in Germany. Because of safety concerns related to sodium leaks and other problems, this small FBR has never started operation. This amount of money corresponds to the price tag for a five times more powerful modern PWR reactor.
A third problem is related to the FBR requirements to have a large inventory of high purity fissile material. The amount of fissile material listed in Table 3 should be compared to the few tens of kgs required for a Pu239 bomb. This problem makes even small experimental FBR reactors highly sensitive to the proliferation problem.

4. Future breeder reactors

As our short overview in Section 2 has already demonstrated, neither sodium cooled FBR reactors based on U238 → Pu239 nor the Th232 → U233 cycle are fashionable commercial reactor types.

As a consequence of the observation that known uranium deposits are limited, scientists from many countries have joined forces and created during the year 2001 the Generation IV reactor forum [24].

In their own words (quote):

"The Generation IV International Forum, or GIF, was chartered in July 2001 to lead the collaborative efforts of the world's leading nuclear technology nations to develop next generation nuclear energy systems to meet the world's future energy needs."

The work of over 100 experts from ten countries, including Argentina, Brazil, Canada, France, Japan, Republic of Korea, South Africa, Switzerland, the United Kingdom, and the United States, and from the International Atomic Energy Agency and the OECD Nuclear Energy Agency has resulted at the end of the year 2002 in a roadmap document with the title:

A Technology Roadmap for Generation IV Nuclear Energy Systems

After the definition of the goals, identifying promising concepts, their evaluation, and the estimation of the required R&D efforts, six systems have been selected. The selection was based on their estimation that they (quote):

"feature increased safety, improved economics for electricity production, and new products such as hydrogen for transportation applications, reduced nuclear wastes for disposal, and increased proliferation resistance."

Within the context of this analysis, we are mainly interested to know whether the acknowledged U235 fuel shortages can be solved with future breeder reactors. Therefore, we will only take a closer look at the three FBR's and the one design that has the potential to become a Th232 based thermal breeder. According to a WNA document from August 2009 [25]:

"At least four of the systems have significant operating experience already in most respects of their design, which provides a good basis for further R&D and is likely to mean that they can be in commercial operation well before 2030."

It is remarkable that the same WNA document contradicts this statement a few lines later:

"However, it is significant that to address non-proliferation concerns, the fast neutron reactors are not conventional fast breeders, i.e. they do not have a blanket assembly where plutonium-239 is produced. Instead, plutonium production takes place in the core, where burn-up is high and the proportion of plutonium isotopes other than Pu239 remains high. In addition, new reprocessing technologies will enable the fuel to be recycled without separating the plutonium."

4.1. Some details about Generation IV breeder reactors

The Generation IV roadmap document from the year 2002 describes a detailed planning for what needs to be achieved during the next 10-20 years. Depending on the results, one might be able to decide which of the different future reactor concepts can be used to construct real prototype FBR's.

The qualitative proposed research plans for the three FBR's and the Th232 reactor can be summarized as follows:

The Gas-cooled Fast Reactor System (GFR) is based on a helium-cooled reactor with a small thermal power of roughly 0.5 GW only. A large number of major technological gaps are mentioned in the roadmap leading to a research program of about 20 years and a cost of 940 million US Dollars.
The Lead-cooled Fast Reactor System (LFR) with a possible thermal power between 0.1 GW and 3.6 GW. A relatively long list of "technology gaps" for the LFR is presented, including even some insufficient knowledge of neutron interaction cross-sections. A 15-20 year R&D program with a price tag of 990 million US Dollars is needed before any further statements about the realization of this concept can be made.
The Sodium-cooled Fast Reactor System (SFR) with a thermal power rating between 1 - 5 GW. This concept is closely related to the doubtful success with past sodium-cooled fast reactors in France, Japan, Germany, the UK, Russia, and the United States. It is said that this reactor must be capable of also using the thermal neutron spectrum, because the startup fuel for the fast reactor must come ultimately from spent thermal reactor fuel. The list of technology gaps includes the need to ensure a "passive safe response design base," a "capital cost reduction," and the "proof that a reactor has the ability to accommodate bounding events." A somewhat frightening conclusion of this statement might be that previous sodium prototype FBR's did not satisfy any of these basic reactor safety standards. It is also mentioned that this sodium cooled reactor is the most advanced FBR system. The required R&D program to investigate the remaining problems could be completed over a period of less than 15 years and for 610 million US Dollars.
The Molten Salt Reactor system (MSR) is imagined as 1 GWe reactor with a net thermal efficiency of 44-50%. The design assumes the use of either U238 or Th232 as fertile fuel dissolved as fluorides in the molten salt and that it can operate with thorium as a thermal breeder. The technology gaps mentioned contain a large number of items related to the chemistry of molten salts as well as the need for more accurate basic neutron cross-sections for compositions of molten salt. The time scale of the required R&D program is 15-20 years with an associated price tag of 1000 million US Dollars.

The Generation IV roadmap document can be summarized with the statement that the known technological gaps to construct even prototype breeder reactors were enormous at the time when the document was written. These unknowns are addressed with a detailed planning for the required research projects and the associated cost. Only after these problems shall have been solved, a design and construction of expensive prototype breeder reactors can start.

We are now at the end of the year 2009 and almost half of the originally planned R&D period is over. Essentially no progress results have been presented and the absence of large funding during the past eight years gives little confidence that even the most basic questions for the Generation IV reactors program can be answered during the next few years. Thus, it seems that the Generation IV roadmap is already totally outdated and unrealistic.

This is confirmed by the latest statements at the Global 2009 conference in September 2009 by B. Bigot, the chairman of the French Atomic Energy Commission, which indicate that the plan to have the reactors ready by the year 2030 is now delayed to 2040 and onwards. According to the Website "Supporters of Nuclear Energy," Bigot said "from 2040 onwards, France is planning to use Generation IV FBR's when renewing its fleet" [26].

4.2. The Global Nuclear Energy Partnership (GNEP)

Another initiative, the Global Nuclear Energy Partnership (GNEP) [27] was announced by President Bush in his 2006 State of the Union address. By September 2007, all major nuclear energy countries, except for Germany and a few others, have signed the statement of principles. According to the U.S. Department of Energy, the goals of the initiative are (quote):

"First, reduce Americas dependence on foreign sources of fossil fuels and encourage economic growth. Second, recycle nuclear fuel using new proliferation-resistant technologies to recover more energy and reduce waste. Third, encourage prosperity growth and clean development around the world. And fourth, utilize the latest technologies to reduce the risk of nuclear proliferation worldwide."

However in June 2009, the U.S. Department of Energy announced that it is no longer pursuing domestic commercial reprocessing, and had largely halted the domestic GNEP program. Research would continue on proliferation-resistant fuel cycles and waste management.

According to a WNA press information [28], the status of this initiative is:

"Although the future of GNEP looks uncertain, with its budget having been cut to zero, the DoE will continue to study proliferation-resistant fuel cycles and waste management strategies."

It follows that the GNEP initiative will not result in the construction of future breeder reactors.

4.3. Ideas about using thorium as a reactor fuel

During the past years, a large number of articles and books, websites and blogs propose the use of thorium as the breeder material for future nuclear reactors [29]. The promoters advocate many interesting possibilities, indicating that the Th232 cycle might have lots of advantages compared to the U238 breeder cycles in FBR's.

The main problem with these "great" new insights into the use of nuclear fission energy seems to be that nobody from the nuclear energy establishment is interested.

As a result, little or no private and public research money is invested into the question of how to develop a thorium breeder reactor. Ignoring the possibility that past investigations into the thorium fuel cycle have revealed several important problems, one needs to speculate about other reasons.

that the established nuclear energy experts do not like to see competition from outsiders, or
that the nuclear fusion community has managed to dominate the entire nuclear energy research domain, and that the available research budgets are already allocated to the ITER plasma research project.

If either of these two possibilities contains some truth, those in favor of developing a thorium breeder reactor should start taking a strong position against the current nuclear energy establishment. They should point out that (i) the current use of nuclear energy has no perspective because of the limited amount of available uranium resources, (ii) the Th232 breeder cycle is by orders of magnitude better than the ideas about U238 breeder cycles with FBR's, and (iii) nuclear fusion is at least 50-100 years away. Leaving these more political issues aside, we would like to repeat some rational statements and the otherwise rarely mentioned problems about the use of the Th232 breeder cycle from the WNA information article [30] entitled:

Developing a thorium-based fuel cycle

where one can read that:

"In one significant respect U233 is better than uranium-235 and plutonium-239, because of its higher neutron yield per neutron absorbed. Given a start with some other fissile material (U233, U235 or Pu239) as a driver, a breeding cycle similar to but more efficient than that with U238 and plutonium (in normal, slow neutron reactors) can be set up. (The driver fuels provide all the neutrons initially, but are progressively supplemented by U233 as it forms from the thorium.) However, there are also features of the neutron economy which counter this advantage. In particular the intermediate product protactinium-233 (Pa233) is a neutron absorber which diminishes U233 yield."

The statement continues with:

"Despite the thorium fuel cycle having a number of attractive features, development has always run into difficulties."

The main attractive features are:

The possibility of utilizing an abundantly available resource that has hitherto been of so little interest that it has never even been properly quantified.
The production of power with few long-lived transuranic elements in the waste.
A reduction of radioactive waste, in general.

The problems include:

The high cost of fuel fabrication due partly to the high radioactivity of U233 chemically separated from the irradiated thorium fuel.
Separated U233 is always contaminated with traces of U232 (69 year half-life but whose daughter products such as thallium-208 are strong gamma emitters with very short half-lives). Although this confers proliferation resistance to the fuel cycle, it results in increased costs.
The similar problems in recycling thorium itself due to highly radioactive Th-228 (an alpha emitter with two-year half life) present.
Some concern over weapons proliferation risk of U233 (if it could be separated on its own), although many designs such as the Radkowsky Thorium Reactor address this concern. The technical problems in reprocessing solid fuels are not yet satisfactorily solved. However with some designs, in particular the molten salt reactor (MSR), these problems are likely to largely disappear.
Much development work is still required, before the thorium fuel cycle can be commercialized, and the effort required seems unlikely while (or where) abundant uranium is available. In this respect, recent international moves to bring India into the ambit of international trade might result in the country ceasing to persist with the thorium cycle, as it now has ready access to traded uranium and conventional reactor designs.

The WNA article concludes with the following diplomatic statement:

"Nevertheless, the thorium fuel cycle, with its potential for breeding fuel without the need for fast neutron reactors, holds considerable potential in the long-term. It is a significant factor in the long-term sustainability of nuclear energy."

A "logic" interpretation of the WNA statement and the list of arguments about thorium and within the context of our review could be:

The breeding of Pu239 with fast neutrons has huge problems, and it would be great if another nuclear fuel could be found.
Thorium breeding shows interesting potential if the remaining large number of problems can be mastered in the long term, but right now, we are still far away from this. The contamination with the strong neutron absorber Pa233 and the large radioactivity from U232 and other elements are chief among the currently unsolved problems.
The well known use of nuclear fission energy in PWR's is unsustainable. The problems related to long-lived transuranic elements, e.g. plutonium and heavier elements, as well as nuclear waste in general, are unsolved. The concern with nuclear weapon proliferation cannot be dismissed either.

5. Fusion Illusions

This section offers a short version of a detailed article by the author in the second edition of The Final Energy Crisis [31].

After the second world war, many nuclear pioneers expected that nuclear fusion would provide their grandchildren with cheap, clean, and essentially unlimited energy.

Generations of physicists and physics teachers have been taught at the university and have gone on to teach others that (i) progress made in fusion research is impressive, (ii) controlled fusion is probably only a few decades away, and (iii) given sufficient public funding, no major obstacles stand between us and success in this field.

Here are some quotes from physics textbooks that reflect this sort of optimism:

"The goal seems to be visible now" (Nuclear and Particle Physics; Frauenfelder and Henley 1974)

"It will most likely take until the year 2000 to bring a laboratory reactor to full commercial utilization" (Energy, Resources and Policy; R. Dorf 1978)

"As the construction of a fusion reactor implies a large number of unsolved practical problems, one cannot expect that fusion will become a usable energy resource during some decades! Within a longer time scale however it seems possible!" (Physics, P. A. Tipler 1991)

Obviously this has not happened yet. The fusion optimists have meanwhile become a bit more modest. One can now read: "If everything goes well, the first commercial fusion reactor prototype might be ready in 50 years from now."

Such statements only hide the fact that no concept has yet been developed for how to solve the remaining problems. The uncritical media of today reverberated enthusiastically the recent decision by "world's leaders" to provide the ten billion US Dollars needed to start the ITER fusion project [32]. During the past few years, one could read, for example [33]:

"If successful, ITER would provide mankind with an unlimited source of energy" (Novosti, November 15, 2005).
"Officials project that 10% to 20% of the world energy could come from fusion by the end of the century" (BBC News, May 24, 2006).
"If successful, it could provide a source of energy that is clean and limitless" and "ITER says, within 30 years, the electricity could be available on the grid!" (BBC News, November 21, 2006).

The public, worried about global warming and oil price explosions, seems to welcome the tacit message that "we -the fusion scientists, the engineers, and the politicians- do everything that needs to be done to bring fusion energy on-line, before fossil fuel supplies become an issue, and before global warming boils us all."

In the following, we challenge the assumption that the ITER project offers any solution to the energy problem, and we quantify the arguments of fusion skeptics.

We start our discussion with an overview of the remaining huge problems facing commercial fusion and offer a detailed description of why the imagined self-sufficient tritium breeding cycle cannot work. In fact, as we are about to see, enough knowledge has been accumulated on this subject to safely conclude that whatever might justify the 10 billion US Dollar ITER project, it is not energy research.

5.1. Remaining barriers to fusion energy

Producing electricity from controlled nuclear fusion would require overcoming at least four major obstacles. The removal of each obstacle would need major scientific breakthroughs before any reasonable expectation might be formed of building a commercial prototype fusion reactor. It should be alarming that at best only the problems concerning the plasma control, described in point one below, might be investigated within the scope of the ITER project. Where and how the others might be dealt with is anyone's guess.

These are the four barriers:

Commercial energy production requires steady state fusion conditions for a deuterium-tritium plasma on a scale comparable to that of today's standard nuclear fission reactors with outputs of 1 GW (electric) and about 3 GW (thermal) power. The current ITER proposal foresees a thermal power of only 0.4 GW using a plasma volume of 840 m³ . Originally it was planned to build ITER with a plasma volume of 2000 m³ corresponding to a thermal fusion power of 1.5 GW, but the fusion community soon realized that the original ITER version would never receive the required funding. Thus a smaller, much less ambitious version of the ITER project was proposed and finally accepted in 2005.
The 1 GW (el) fission reactors of today function essentially in a steady state operation at nominal power and with an availability time over an entire year of roughly 90%. The deuterium-tritium fusion experiments have so far achieved short pulses of fusion power of 15 MW (therm) for one second and 4 MW (therm) for 5 seconds, corresponding to a liberated thermal energy of 5 kWh [34]. The Q-value (produced energy over input energy) for these pulses was 0.65 and 0.2, respectively.

If everything works according to the latest plans [35], it will be 2018 when the first plasma experiments can start with ITER. From there, it will take us to 2026, at least another eight years, before the first tritium experiments are tried. The original plans from 2005 are now, even before any serious construction has started, already delayed by four years. In other words, it will take at least 20 years from the agreement by the world's richest countries to construct ITER, before one can ﬁnd out if the goals of ITER, a power output of 0.5 GW (therm) with a Q-value of up to 10 and for 400 seconds, are realistic. Compare that to the original ITER proposal, which was 1.5 GW (therm), with a Q-value between 10-15 and for about 10,000 seconds. ITER proponents explain that the achievement of this goal would already be an enormous success. But this goal, even if it can be achieved by 2026, pales in comparison with the requirements of steady-state operation, year after year, with only a few minor controlled interruptions.

Previous deuterium-tritium experiments used only minor quantities of tritium, and yet lengthy interruptions between successive experiments were required, because the radiation from the tritium decay was so excessively high. In earlier fusion experiments, such as JET, the energy liberated in the short pulses came from burning (fusing) about 3 micrograms (3 × 10^-6 grams) of tritium, starting from a total amount of 20 gr of tritium. This number should be compared with the few kilograms of tritium required to perform the experiments foreseen during the entire ITER lifetime and with the still greater quantities that would be required for a commercial fusion reactor. A 400 sec fusion pulse with a power of 0.5 GW corresponds to the burning of 0.035 gr (3.5 × 10^-2 grams) of tritium, a very large number, when compared to 3 micrograms, but a tiny number when compared with the yearly burning of 55.6 kilograms of tritium in a commercial 1 GW (therm) fusion reactor.

The achieved efficiency of the tritium burning (i.e., the amount that is burned divided by the total amount required to achieve the fusion pulse) was roughly 1 part in a million in the JET experiment and is expected to be about the same in the ITER experiments, far below any acceptable value, if one wants to burn 55.6 kg of tritium per year.

Moreover in a steady-state operation, the deuterium-tritium plasma will be "contaminated" with the helium nucleus that is produced, and some instabilities can be expected. Thus a plasma cleaning routine is needed that would not cause noticeable interruptions of production in a commercial fusion plant. ITER proponents know that even their self-defined goal (a 400 second long deuterium-tritium fusion operation within the relatively small volume of 840 m³) presents a great challenge. One might wonder what they think about the difficulties involved in reaching steady-state operation for a full-scale fusion power plant.
The material that surrounds and contains thousands of cubic meters of plasma in a full-scale fusion reactor has to satisfy two requirements. First, it has to survive an extremely high neutron flux with energies of 14 MeV, and second, it has to do this not for a few minutes but for many years. It has been estimated that in a full-scale fusion power plant the neutron flux will be at least 10-20 times larger than in today's state-of-the-art nuclear fission power plants. Since the neutron energy is also higher, it has been estimated that -with such a neutron flux- each atom in the solid surrounding the plasma will be displaced 475 times over a period of 5 years [36]. Second, to further complicate matters, the material in the so called first wall (FW) around the plasma will need to be very thin in order to minimize inelastic neutron collisions resulting in the loss of neutrons (for more details see next section), yet at the same time thick enough so that it can resist both the normal and the accidental collisions from the 100-million-degree hot plasma for years.
The "erosion" from the neutron bombardment has been estimated to be about 3 mm per "burn" year for carbon-like materials, and it has been estimated to be about 0.1 mm per burn year even for materials like tungsten [36].

In short, no material known today can even come close to meeting the requirements described above. Exactly how a material that meets these requirements could be designed and tested remains a mystery, because tests with such extreme neutron fluxes cannot be performed either at ITER or at any other existing or planned facility.
The radioactive decay of even a few grams of tritium creates radiation dangerous to living organisms, such that those who work with it must take sophisticated protective measures. Moreover, tritium is chemically identical to ordinary hydrogen, and as such is very active and difficult to contain. Since tritium is also a necessary ingredient in hydrogen fusion bombs, there is additional risk that it might be stolen. So, handling even the few kg of tritium foreseen for ITER is likely to create major headaches both for the radiation protection group and for those concerned with the proliferation of nuclear weapons.
Both of these challenges are essentially ignored in the ITER proposal, and the only thing the protection groups have to work with today are design studies based on computer simulations. This may not be of concern to the majority of ITER's promoters today, since they will be retiring before the tritium problem starts in something like 10 to 15 years from now [37], but at some point, it will become a greater challenge also for ITER and especially once one starts to work on a real fusion experiment with many tens of kilograms of tritium.
Problems related to tritium supply and self-sufficient tritium breeding will be discussed in detail in Section 5.2, but first, it will be useful to describe qualitatively two problems that seem to require simultaneous miracles, if they are to be solved.
- The neutrons produced in the fusion reaction will be emitted essentially isotropically in all directions around the fusion zone. These neutrons must somehow be convinced to escape without further interactions through the first wall surrounding the few 1000 m³ plasma zone. Next, the neutrons have to interact with a "neutron multiplier" material like beryllium in such a manner that the neutron flux is increased without transferring too much energy to the remaining nucleons. The neutrons then must transfer their energy without being absorbed (e.g. by elastic scattering) to some kind of gas or liquid, like high pressure helium gas, within the lithium blanket. This heated gas has to be collected somehow from the gigantic blanket volume and must flow to the outside. This heat can be used as in any existing power plant to power a generator turbine. This liquid should be as hot as possible, in order to achieve reasonable efficiency for electricity production. However, it is known that the lithium blanket temperature cannot be too high. This limits the efficiency to values well below those from today's nuclear fission reactors, which also do not have a very high efficiency.
  Once the heat is extracted and the neutrons are slowed sufficiently, they must make the inelastic interaction with the Li⁶ isotope, which makes up about 7.5% of the natural lithium. The minimal thickness of the lithium blanket that surrounds the entire plasma zone has been estimated to be at least 1 meter. Unfortunately, lithium like hydrogen (tritium atoms are chemically identical to hydrogen) in its pure form is chemically highly reactive. If used in a chemical bound state with oxygen, for example, the oxygen itself could interact and absorb neutrons, something that must be avoided. In addition, lithium and the produced tritium will react chemically -which is certainly not included in any present computer modeling- and some tritium atoms will be blocked within the blanket. Unfortunately, additional neutron and tritium losses cannot be allowed, as will be described in more detail in Section 5.2.
- Next, an efficient way has to be found to extract the tritium quickly, and without loss, from this lithium blanket before it decays. We are talking about a huge blanket here, one that surrounds the few 1000 m³ plasma volume. Extracting and collecting the tritium from this huge lithium blanket will be very tricky indeed, since tritium penetrates thin walls relatively easily, and since accumulations of tritium are highly explosive. An interesting description of some of these difficulties that have already been encountered in a small-scale experiment can be found in reference [38].
  Finally assuming we get that far, the extracted and collected tritium and deuterium, which both need to be extremely clean, need to be transported, without losses, back to the reactor zone.

Each of the unsolved problems described above is by itself serious enough to raise doubts about the success of commercial fusion reactors. But the self-sufficient tritium breeding is especially problematic, as will be described in the next section.

5.2. The illusions of tritium self-sufficiency

A self-sustained tritium fusion chain appears to be not simply problematic but absolutely impossible. To see why, we shall now look into some details based on what is already known about this problem.

A central quantity for any fission reactor is its criticality, namely that exactly one neutron, out of the two to three neutrons "liberated" per fission reaction, will enable another nuclear fission reaction. More than 99% of the liberated fission energy is taken by the heavy fission products such as barium and krypton, and this energy is relatively easily transferred to a cooling medium. The energy of the produced fission neutrons is about 1 MeV. In order to achieve the criticality condition, the surrounding material must have a very low neutron absorption cross-section, and the neutrons must be slowed down to eV energies. For a self-sustained chain reaction to happen, a large amount of U235, enriched to 3-5%, is usually required. Once the nominal power is obtained, the chain reaction can be regulated using materials with a very high neutron absorption cross-section. A much higher enrichment of 20% is required for fast reactors without moderators and up to 90% for bombs.

In contrast to fission reactions, only one 14 MeV neutron is liberated in the D + T → He + n fusion reaction. This neutron energy has to be transferred to a medium using elastic collisions. Once this is done, the neutron is supposed to make an inelastic interaction with a lithium nucleus, splitting it into tritium and helium.

Starting with the above reaction, one can calculate how much tritium burning is required for a continuously operating commercial fusion reactor assuming a power production of 1 GW (thermal). One finds that about 55.6 kg of tritium needs to be burned per year with an average thermal power of 1 GW.

Today, tritium is extracted from Canadian heavy water reactors at extraordinary cost - about 30 million US Dollars per kg. These old heavy water reactors will probably stop operation around the year 2025, and it is expected that a total tritium inventory of 27 kg will have been accumulated by that year [39]. Once these reactors stop operating, this inventory will be depleted by more than 5% per year due to its radioactive decay alone - tritium has a half-life of 12.3 years. As a result, for the prototype "PROTO" fusion reactor, which fusion optimists imagine to start operation not before the year 2050, at best only 7 kg of tritium might remain for the start (Normal ﬁssion reactors produce at most 2-3 kg per year, and the extraction costs have been estimated to be 200 million dollars per kg [39].). It is thus obvious that any future fusion reactor experiment beyond ITER must not only achieve tritium self-sufficiency, it must create more tritium than it uses, if there are to be any further fusion projects.

The particularly informative website of Prof. Abdou from UCLA, one of the world's leading experts on tritium breeding, offers relevant numbers both about the basic requirements for tritium breeding and the state of the art today [40]. Yet, let us start with first things first, as understanding such "expert" discussions requires acquaintance with some key terms:

The required Tritium Breeding Ratio (rTBR) stands for the minimal number of tritium nuclei that must be produced per fusion reaction in order to keep the system going. It must be larger than one because of tritium decay and other losses and because of the necessary inventory in the tritium processing system and the stockpile for outages and for the startup of other plants. The rTBR value depends on many system and technology parameters.
The achievable Tritium Breeding Ratio (aTBR) is the value obtained from complicated and extensive computer simulations -so-called 3-dimensional simulations- of the blanket with its lithium and other materials. The aTBR value depends on many parameters like the first wall material and the incomplete coverage of the breeding blanket.
Other important variables are used to define quantitatively the value of the rTBR. These include: (1) the "tritium doubling time," the time in years required to double the original inventory; (2) the "fractional tritium burn-up" within the plasma, expected to be at best a few %; (3) the "reserve time," the tritium inventory required in days to restart the reactor after some system malfunctioning with a related tritium loss; and (4) the ratio between the calculated and the experimentally obtained TBR.

The handling of neutrons, tritium, and lithium requires particular care, not only because of radiation, but also because tritium and lithium atoms are chemically very reactive elements. Consequently, real-world large-scale experiments are difficult to perform, and our understanding of tritium breeding is based almost entirely on complicated and extensive computer simulations, which can only be done in a few places around the world.

Some of these results are described in a publication by Sawan and Abdou from December 2005 [41]. The authors assume that a commercial fusion power reactor of 1.5 GW (burning about 83 kg of tritium per year) would require a long-term inventory of 9 kg, and they further assume that the required startup tritium is available.

They argue that, according to their calculations, the absolute minimum rTBR is 1.15, assuming a doubling time of more than 4 years, a fractional tritium burn-up larger than 5%, and a reserve time of less than 5 days. Requiring a shorter doubling time of 1 year, their calculations indicate that the rTBR should be around 1.5. More numbers can be read out from their figures. For example, one finds that if the fractional burn-up would be 1%, the rTBR should be 1.4 for a 5 year doubling time and even 2.6 for a 1 year doubling time. The fractional tritium burn-up during the short MW pulses in JET was roughly 0.0001%.

The importance of short tritium doubling times can be understood easily using the following calculation. Assuming these numbers can be achieved and that 27 kg tritium (2025) minus the 9 kg long-term inventory would be available at start-up, then 18 kg could be burned in the first year. A doubling time of 4 years would thus mean that such a commercial 1.5 GW (thermal) reactor can operate at full power only 8 years after the start-up.

Unfortunately, these rTBR estimates are far too optimistic as a number of potential losses related to the tritium extraction, collection, and transport are not considered in today's simulations.

The details become even more troubling when we turn to the tritium breeding numbers that have been obtained with computer simulations.

After many years of detailed studies, current simulations show that the blanket designs of today have, at best, achieved TBR's of 1.15. Using this number, Sawan and Abdou conclude that a small window for tritium self-sufficiency still exists theoretically. This window requires (1) a fractional tritium burn up of more than 5%, (2) a tritium reserve time of less than 5 days, and (3) a doubling time of more than 4 years. Yet even using these numbers, the authors believe it to be difficult to imagine a real operating power plant. In their own words: "for fusion to be a serious contender for energy production, shorter doubling times than 5 years are needed," and the fact is, doubling times much shorter than 5 years appear to be required, which means that TBR's much higher than 1.15 are necessary. To make matters worse, they also acknowledge that current systems of tritium handling need to be explored further. This probably means that the tritium extraction methods from nuclear fission reactors are nowhere near meeting the requirements.

Sawan and Abdou also summarize various effects that reduce the obtained aTBR numbers, once more realistic reactor designs are studied, and structural materials, gaps, and first wall thickness are considered. For example, they find that as the first wall, made of steel, is increased by 4 cm starting from a 0.4 cm wall, the aTBR drops by about 16%. It would be interesting to compare these assumptions about the first wall with the ones used in previous plasma physics experiments like JET and the one proposed for ITER. Unfortunately, we have so far not been able to obtain any corresponding detailed information. However, as it is expected that the first wall in a real fusion reactor will erode by up to a few mm per fusion year, the required thin walls seem to be one additional impossible assumption made by the fusion proponents.

Other effects, as described in detail by Sawan and Abdou [41], are known to reduce the aTBR even further. The most important ones come from the cooling material required to transport the heat away from the breeding zone, from the electric insulator material, from the incomplete angular coverage of the inner plasma zone with a volume of more than 1000 m³, and from the plasma control requirements.

This list of problems is already very long and shows that the belief in a self-sufficient tritium chain is completely unfounded. However, on top of that, some still very idealized TBR experiments have been performed now. These real experiments show, according to Sawan and Abdou [41], that the measured TBR results are consistently about 15% lower than the modeling predicts. They write in their publication: "the large overestimate (of the aTBR) from the calculation is alarming and implies that an intense R&D program is needed to validate and update .. our ability to accurately predict the achievable TBR."

One might conclude that a correct interpretation could have been:

Today's experiments show consistently that no window for a self-sufficient tritium breeding currently exists and suggest that proposals that speak of future tritium breeding are based on nothing more than hopes, fantasies, misunderstandings, or even intentional misrepresentations.

5.3. Ending the dreams about controlled nuclear fusion

As we have explained above, there is a long list of fundamental problems concerning controlled fusion. Each of them appears to be large enough to raise serious doubts about the viability of the chosen approach to a commercial fusion reactor and thus about the 10 billion US Dollars ITER project.

Those not familiar with the handling of high neutron fluxes or the possible chemical reactions of tritium and lithium atoms might suppose that these problems are well known within the fusion community and are being studied intensively. But the truth is, none of these problems have been studied intensively and, at best, even with the ITER project, the only problems that might be studied relate to some of the plasma stability issues outlined in Section 5.1. All of the other problem areas are essentially ignored in today's discussions among ITER experts.

Confronted with the seemingly impossible tritium self-sufficiency problem that must be solved before a commercial fusion reactor is possible, the ITER experts tell you that this is not a problem that the current ITER project is to address. It won't be until the next generation of experiments -experiments that will not begin for roughly another 30 years according to official plans- that issues related to tritium self-sufficiency will have to be dealt with. They seem to also be comfortable with the fact that neither the problems related to material aging due to the high neutron flux nor the problems related to tritium and lithium handling can be tested with ITER.

However, among those who are not part of ITER and who do not expect miracles, an ever increasing number of scientists is coming to the conclusion that commercial fusion reactors can never become a reality. They are even starting to receive attention from the media as they argue ever more loudly that the ITER project will contribute very little, if anything, to energy research [42].

One scientist who should be listened to more widely is Prof. Abdou. In a presentation in 2003 that was prepared on behalf of the US fusion chamber technology community for the US Department of Energy (DOE) Office of Science on Fusion Chamber Technology, he wrote that "tritium supply and self-sufficiency are a 'Go-No Go' issue for fusion energy, [and are therefore] as critical NOW as demonstrating a burning plasma" [capitalization in original]. He pointed out that "there is NOT a single experiment yet in the fusion environment that shows that the DT fusion fuel cycle is viable." He said that "proceeding with ITER makes Chamber Research even more critical" and he asked: "What should we do to communicate this message to those who influence fusion policy outside DOE?" [43]. In short, to go ahead with ITER without addressing these chamber technology issues makes very little sense economically.

In the light of everything that has been said in this section, it seems clear that the nuclear fusion scientists should be telling the truth to the tax payers, the policy makers, and the media. They should tell them that, after 50 years of very costly fusion research conducted at various locations around the world, enough knowledge exists to state that:

today's achievements in all relevant areas of nuclear fusion are still many orders of magnitude away from the basic requirements of a fusion prototype reactor;
no material or structure is known that can withstand the extremely high neutron flux expected under realistic deuterium-tritium fusion conditions; and
self-sufficient tritium breeding appears to be impossible to achieve under the conditions required to operate a commercial fusion reactor.

It is late, but perhaps not too late, to acknowledge that the ITER project is at this point nothing more than an expensive experiment to investigate some fundamental aspects of plasma physics. Since this would in effect acknowledge that the current ITER funding process is based on faulty assumptions and that ITER should in all fairness be funded on equal terms with all other basic research projects, acknowledging these truths will not be easy. Yet, it is the only honest thing to do.

It is also the only path that will allow us to transfer from ITER to other more promising research efforts the enormous resources and the highly skilled talents that need now to be brought to bear on our increasingly urgent energy problems. In short, this is the only path that will allow us to stop "throwing good money after bad" and to start dealing with our emerging energy crisis in a realistic way.

6. Summary

In this fourth and final part of our analysis about the Future of Nuclear Energy, we have presented status and prospects for nuclear fuel breeder fission reactors and the true situation as it relates to nuclear fusion.

Despite the often repeated claims that the technology for fast reactors is well understood, one finds that no evidence exists to back up such claims. In fact, their huge construction costs, their poor safety records, and their inefficient performance give little reason to believe that they will ever become commercially significant.

Indeed, no evidence has been presented so far that the original goal of nuclear fuel breeding has been achieved. The designs and running plans for the two FBR's, currently under construction in India and in Russia, do not indicate that successful breeding can even in principle be achieved.

Nevertheless, assuming that extensive and costly efforts are being undertaken during the next 20-30 years, a remote possibility of mastering nuclear fission breeder reactor technology can still be imagined. However, it is unclear if (1) enough highly enriched uranium remains to start future commercial breeder reactors on a large scale in 30-40 years from now, and (2) if the people in rich societies will accept risky and costly research efforts during times of economic difficulties. In any case, fast breeder reactors, even under the most optimistic assumptions, will come far too late to compensate for the looming energy decline following the peaking of oil and gas.

In contrast to the remaining open questions relating to fission breeders, we find that the accumulated knowledge about nuclear fusion is already now large enough to conclude that commercial fusion power is not only 50 years away, but that it will always be 50 years away.

The current situation concerning the future of nuclear energy appears in many respects similar to the one described in a famous fairy tale [44], but with a slightly modified ending:

"In the coming 'autumn and winter' of our industrial civilization brought on by the decline of fossil fuels, it seems clear that the clothes of the Nuclear Fission Energy emperor are far too thin to keep him and others warm, and that the Nuclear Fusion Emperor has no clothes at all!"

Acknowledgments

This report about the Future of Nuclear Energy: Facts and Fiction, and especially its fourth part, is a result of many questions that the author asked scientists active within the fission and fusion research communities over the past few years. Essentially, none was answered and no help was provided to get in contact with the corresponding "fission" and "fusion" experts. Thus in some kind of "hobby" research, which included discussions with friends, colleagues, and many believers in never ending technological progress, the different pieces concerning the future of nuclear energy summarized in this report came together.

During early 2007, an attempt was made to discuss the fusion problems in an open and scientific way directly with scientists from the fusion community. After coming as far as fixing the date for a seminar, the author received an email stating that there had been a "misunderstanding," and the envisaged dialog never took place. A similar initiative to discuss open issues about nuclear fission energy was undertaken in 2008. Again, it came as far as a seminar invitation that was canceled when trying to fix a date.

However during the spring of 2007, the author received an invitation to present the "Status and Prospects of Nuclear Energy" at the 6^th ASPO meeting in Cork, Ireland in September 2007. In preparation for this presentation, the author took the time to study the 2005 edition of the Red Book in detail. Many questions about the uranium resource numbers, presented in the Red Book, came up, but the inconsistencies were not yet large enough to start doubting the data. This view changed however, when the 2007 edition appeared together with an enthusiastic press declaration in June 2008. As it turned out from comparing the 2007 and 2005 editions, the reported uranium resource data were nothing but a collection of proven and unproven geological data mixed with politically correct wishful thinking about a sustainable and bright future for the peaceful use of nuclear energy. This is how this report with its first three parts concerning the Red Book and the analysis of future nuclear energy technologies started to take shape.

Even though the views expressed in this paper are from the author alone, I would like to thank several colleagues and friends who took the trouble to discuss the content of this report during the past few years with me. They all helped me to bring it into its final form. I would like to thank especially D. Hatzifotiadou, W. Tamblyn, and F. Spano for many valuable suggestions and the careful reading of the paper draft. I would also like to thank S. Newman, who had asked me during the spring of 2007 to prepare a chapter about "Fusion Illusions" for the second edition of the book "The Final Energy Crisis." Her encouragement was essential to writing the longer report about nuclear fusion energy.

Finally, after several attempts to complete also the report about the Red Book and the status and prospects of nuclear fission energy, it was Prof. F. Cellier who suggested to split this report into four separate parts and submit it to the Oil Drum for publication. I am very grateful to him about the many valuable discussions we had, for the encouragement to complete this report, and for his editing work to transform the article into the style needed for the Oil Drum publication. I am also grateful to the staff of the Oil Drum for having created a place where such articles, often censored in other places, can be published and confronted directly to the comments of a large number of critical readers.

Thus, the author hopes, with the ideas expressed in the quote from Gustave Le Bon below, that this report will function like some kind of "telescope," helping others to observe that some objects are moving around Jupiter.

"Science promised us truth, or at least a knowledge of such relations as our intelligence can seize: it never promised us peace or happiness"
Gustave Le Bon

References

[1] For a historic overview, cf. http://www.cfo.doe.gov/me70/manhattan/cp-1_critical.htm.

[2] http://en.wikipedia.org/wiki/Nuclear_power.

[3] For the fraction of nuclear electric energy production in 2007, cf. page 17 of http://www.iea.org/textbase/nppdf/free/2009/key_stats_2009.pdf.

[4] Cf. for example http://en.wikipedia.org/wiki/Fast_breeder_reactor; http://hyperphysics.phy-astr.gsu.edu/hbase/nucene/fasbre.html; and under the subtitle "Is nuclear energy renewable?" in http://www.world-nuclear.org/info/inf09.html.

[5] "All agree, however, that successful completion of this research could provide humans with perhaps the 'final solution' to their energy needs." in http://www.bookrags.com/research/nuclear-fusion-enve-02/ or "The final solution of energy problems seems to be achieved only by the realization of nuclear fusion." from the abstract in http://www.osti.gov/energycitations/product.biblio.jsp?osti_id=5915187.

[6] Parts I, II, and III of this four-part article have been published at the Oil Drum, August/September 2009 at http://europe.theoildrum.com/node/5631, http://europe.theoildrum.com/node/5677, and http://europe.theoildrum.com/node/5744, respectively. The articles are also available at the preprint archive http://xxx.lanl.gov/ filed under Physics and Society at http://xxx.lanl.gov/abs/0908.0627, http://xxx.lanl.gov/abs/0908.3075, and http://xxx.lanl.gov/abs/0909.1421, respectively.

[7] The IAEA data base about existing nuclear reactors can be accessed at http://www.iaea.org/programmes/a2/. A qualitative overview of different FBR's is presented at http://www.eoearth.org/article/Fast_neutron_reactors_(FBR).

[8] The WNA document about Russia, http://www.world-nuclear.org/info/inf45.html, mentions the year 2010 as BN-600 termination date.

[9] The IAEA fast reactor data base with many detailed publications can be accessed at http://www.iaea.org/inisnkm/nkm/aws/frdb/index.html. The BN-600 design breeding gain of -0.15 is mentioned in [22], page 46.

[10] The actual status of the Phenix reactor is described in the WNA document about FBR's: http://www.world-nuclear.org/info/inf98.html.

[11] For a list of previously scheduled Monju restarts, cf. http://www.world-nuclear-news.org/stdsearch.aspx?sparam=monju&ﬁd=778.

[12] The WNA document about India, http://www.world-nuclear.org/info/inf53.html, mentions 2010 as the FBR startup date, with commercial power production starting in 2011.

[13] For some information about running experience with thorium reactors, cf. the WNA document http://www.world-nuclear.org/info/inf62.html.

[14] According to a Wikipedia article, the power density in the sun is estimated at 0.272 W/m³ http://en.wikipedia.org/wiki/Sun. At other places, such as Klaus Heinloth, Die Energiefrage (2003), a roughly 1000 times larger fusion power density is given.

[15] The text of the NPT is reproduced at http://www.un.org/events/npt2005/npttreaty.html. Especially, articles IV and VI have important implications for today’s discussions about Iran and other states.

[16] A three minute documentation about the explosion of the Tsar bomb can be found at you-tube http://www.youtube.com/watch?v=j2nQopP73XI&feature=player_embedded.

[17] Many interesting scenes from the "Dr. Strangelove" movie can be found at you-tube. For example, the ones from ending http://www.youtube.com/watch?v=iesXUFOlWC0&feature=related and http://www.youtube.com/watch?v=wxrWz9XVvls are very revealing.

[18] For some details about the relations between radiation and cancer, cf. http://www.cancer.org/docroot/ped/content/ped_1_3x_radiation_exposure_and_cancer.asp.

[19] The formula is in chapter 4, page 106 of the book Nuclear Engineering: Theory and Technology of Commercial Nuclear Power by Ronald Allen Knief, New York: Hemisphere Pub. Corp., 1992. Many more interesting aspects about energy from nuclear fission are explained in this book.

[20] Details about the thorium breeding experiments with the Shippingport reactor are given in http://www.inl.gov/technicalpublications/Documents/2664750.pdf and http://www.osti.gov/bridge/servlets/purl/769053-hlSCmO/native/769053.pdf.

[21] The breeding ratio of 1.14 for the Phenix FBR is given in many papers and textbooks. However according to the [22] document, this value is the design value, and not the result of an experimental analysis.

[22] The fuel content of the FBR core and other pieces of information are taken from the IAEA document http://www.iaea.org/inisnkm/nkm/aws/frdb/fulltext/03_coreCharacteristics.pdf#37.

[23] For the WNA quote about the BN-800 FBR, cf. http://www.world-nuclear.org/info/inf98.html, and for some interesting details about the timescale of the nuclear energy evolution in Russia, cf. the WNA document http://www.world-nuclear.org/info/inf45.html.

[24] Details about the Generation IV International Forum (GIF) can be found at their website http://www.gen-4.org/. The detailed roadmap program is presented at http://www.gen-4.org/Technology/roadmap.htm.

[25] The statements from the WNA can be found at http://www.world-nuclear.org/info/inf77.html.

[26] The statement by Bernard Bigot, chairman of the French Atomic Energy Commission, made at the September Global 2009 "The Nuclear Fuel Cycle" conference is repeated at the website of the supporters of nuclear energy http://www.sone.org.uk/ at http://www.sone.org.uk/content/view/1349/2/.

[27] Information about the Global Nuclear Energy Partnership (GNEP) can be obtained from their website http://www.gneppartnership.org/index.htm.

[28] The June 29, 2009 news item from the WNA entitled "Fatal Blow to GNEP?" can be found at http://www.world-nuclear-news.org/NP-DoE_cancels_GNEP_EIS-2906095.html.

[29] Many discussion topics, research articles, and discussions about the use of thorium can be found at the http://www.energyfromthorium.com/ website.

[30] The pragmatic down-to-earth statement about future thorium breeders comes from the WNA article about "thorium" in http://www.world-nuclear.org/info/inf62.html.

[31] The original article "Fusion Illusions" is published in the second edition of the The Final Energy Crisis edited by S. Newman. For more details and many other articles about the coming energy crisis, cf. http://candobetter.org/TFEC/.

[32] For the ITER homepage and further details, cf. http://www.iter.org/default.aspx. More technical details about the ITER status can be found at the website of the USA fusion community at http://ﬁre.pppl.gov/.

[33] Cf. for example http://news.bbc.co.uk/2/hi/science/nature/6165932.stm and http://news.bbc.co.uk/2/hi/science/nature/5012638.stm.

[34] Cf. for example John Wesson, The Science of JET, Chapter 1and Appendix I, March 2000 at http://www.jet.efda.org/documents/books/wesson.pdf for the timeline of the JET experiments.

[35] The new, four-year-delayed date for the first deuterium-tritium experiments in 2026 has been announced at the 4^th ITER Council meeting in June 2009, as described at http://www.iter.org/proj/Pages/ITERMilestones.aspx. However, it seems that nothing goes as planned. According to an article in Nature, October 13, 2009, ITER has been at a standstill since April, http://www.nature.com/news/2009/091013/full/461855a.html.

[36] For more details, cf. the presentations by B. D. Wirth at http://www.nuc.berkeley.edu/courses/classes/NE39/Wirth-FusionMaterials_lecture2.pdf and
S. J. Zinkle (2004), page 47 at http://ﬁre.pppl.gov/aps_dpp04_zinkle.pdf.

[37] The ITER people seem to be working on a new quantitative construction and operation timeline, as details are currently not available on the ITER homepage. However a qualitative overview can be be found at http://www.iter.org/PROJ/Pages/ITERAndBeyond.aspx. The original 50 year timeline towards the realization of the DEMO and PROTO fusion devices is described at http://www.fusion.org.uk/culham/fasttrack.pdf.

[38] J. L. Anderson, Tritium Systems: Issues and Answers, Journal of Fusion Energy, Vol 4, Nos. 2/3, 1985 and http://www.springerlink.com/content/m34445687252l544/.

[39] Cf. for example M. Abdou, Notes for Informal Discussion with Senior Fusion Leaders in Japan (JAERI and Japanese Universities), March 24, 2003.

[40] The website of Prof. M. Abdou, http://www.fusion.ucla.edu/abdou/.

[41] M. E. Sawan and M. A. Abdou, Physics and technology conditions for attaining tritium self-sufficiency for the DT fuel cycle, Fusion Engineering and Design, 81 (2006) 1131-44 and http://dx.doi.org/10.1016/j.fusengdes.2005.07.035.

[42] Cf. for example S. Balibar, Y. Pomeau and J. Treiner, La France et l'énergie des étoiles, point de vue, Le Monde, 24 October 2004, and W. E. Parkins, Fusion Power: Will It Ever Come, March 10 Science Vol 311.

[43] M. Abdou, Briefing to DOE Office of Science, Washington June 3, 2003 at http://www.fusion.ucla.edu/abdou/abdou presentations/2003/orbach pres (6-1-03) Final1.ppt.

[44] It seems that "history" sometimes repeats itself. Hans Christian Andersen (1837) fairy tale, "The Emperor’s New Suit," can be found at http://hca.gilead.org.il/emperor.html.

EROWI - energy return of water invested

Ugo Bardi — Thu, 05 Nov 2009 10:15:42 -0400

Energy Return of Water Invested (EROWI). From an article by Robert Service in Science Magazine. The data in the table originate from "Energy demands on water resources",report to the congress, 2006 link.

The readers of "The Oil Drum" are familiar with the concept of "Energy Return of Energy Invested" (EROI or EROEI). It is the ratio of the energy produced by an energy plant during its life cycle to the amount of energy needed to build, operate and dismantle the plant.

EROEI remains one of the most useful parameters that can be used for evaluating an energy technology, but it is not the only one. Another element is the need of water. Water is needed for irrigation of plants to be used as fuel and all large plants using thermal engines need water cooling. We can speak, then, of Energy return of Water Invested (EROWI). It is a concept much more recent than that of EROEI, but which is rapidly gaining attention and may be not less important.

Recently, Robert F. Service reported the comparative table that you can see reproduced at the beginning of this post. The data are taken from an article by Dominguez-faus et al. published in "Environmental Science and Technology" in 2009. Service's paper, as most of the studies published so far in this field, is dedicated to showing how water thirsty biofuels are. It is another drawback for a technology which has also a low EROEI, needs large areas, and competes for land with food production.

But the problem is more general and doesn't just involve biofuels. Nuclear plants, for instance, seem to be especially vulnerable to water scarcity. During the past few years, several plants had to be shut or slowed down, or allowed to drain water into rivers at higher temperatures than considered safe. A set of references on the troubles of nuclear plants during heat waves can be found here .

The problem may affect all thermal plants which are large and inefficient enough; coal plants for instance. According to Service's data, the problem can be eased moving from "once through" to "closed loop" cooling. But, if it were easy, there would be no "once through" plants. Evidently, closed loop cooling is more expensive and, in practice, the result of increasing EROWI may be to reduce EROEI.

Water is, of course, a renewable resource but a lot of the water used today is "fossil" water. It comes from deep aquifers which can be drained empty as it has happened, for instance in Saudi Arabia . In addition, climate change may further reduce the water supply in many areas of the world. How much these factors will affect energy generation worldwide in the near future is difficult to say at present, but surely the problem shouldn't be underestimated. The EROWI problem, in the end, is just an indication that we are hitting yet another limit of our finite environment.

The EROWI concept is examined in depth, especially for biofuels, in an article titled "Burning Water: A Comparative Analysis of the Energy Return on Water Invested" by Kenneth Mulder, Nathan Hagens and Brendan Fisher, in press on AMBIO (The Journal of Human Environment) .

An interview with Stoneleigh - the case for deflation

Euan Mearns — Sat, 31 Oct 2009 10:57:03 -0400

At the ASPO conference in Denver, October 2009, I had the good fortune to meet Stoneleigh, former editor of The Oil Drum Canada, who left the The Oil Drum crew with colleague Ilargi to set up The Automatic Earth where they publish stories, news and analysis of the unfolding financial crisis. I spent a couple of days chatting with Stoneleigh where she recounted her rather gloomy prospects for the immediate future of the global economy. The following interview is a summary of her analysis of the unfolding situation. Note that in a departure from convention, my questions are set in "blockquotes" to distinguish these from Stoneleigh's responses.

Stoneleigh, the world economy seems to be suffering from two great structural woes at present, namely stubbornly high energy prices that are linked to demand that is persistently ahead of the supply curve, and a level of debt that has destabilized the global finance and banking systems. Can you explain for us the scale and structure of this debt and to what extent write-downs and quantitative easing (QE) have solved this problem?

Firstly, I would say that the energy prices that currently seem stubbornly high should fall substantially as the speculative premium evaporates and demand falls on a resumption of the credit crunch. The sucker rally that has spawned all the talk of green shoots is essentially over in my opinion. The result should be a reversal of a number of trends that depend on the ebb and flow of liquidity - we should see stock markets and commodity prices fall, a significant resurgence in the US dollar and a large contraction of credit. The scale of the reversal should be substantial, as should its effects on energy demand. Demand is not what one wants, but what one is ready, willing and able to pay for, and in a severe credit crunch the capacity to pay for supplies of most things will be severely reduced.

Figure 1

As demand falls, and with it prices, investment in the energy sector is likely to dry up. Many projects will be uneconomic at much lower prices, meaning that the projects which might have cushioned the downslope of Hubbert’s curve (and the much steeper net energy curve), are unlikely to be developed. In this way a demand collapse sets the stage for a supply collapse that could place a hard ceiling on any prospect of economic recovery. That is a recipe for extremely high energy prices in the future.

Secondly, our vulnerability to the consequences of debt is extremely high at the moment. The scale of that debt is staggeringly large. The global credit hyper-expansion has been decades in the making and is now significantly larger than notable events of the past such as the South Sea Bubble of the 1720s and the Tulip Bubble of the 1630s. It dwarfs the excesses that led to the Great Depression.

Figure 2

Credit bubbles are inherently self-limiting, proceeding until the debt they generate can no longer be supported. We have already passed that point, and we are now two years into a contraction phase that is about to accelerate. As the aftermath of a credit bubble is typically proportional to the scale of the excesses that preceded it, we should be in for the largest economic contraction in at least several hundred years, and it will be global.

Real estate, which is a major focus of the mania, should do particularly badly in the coming years (in fact the coming decades or longer). There is still so much deleveraging ahead, and so many danger signals, such as the scale of the coming interest resets on US mortgages between now and 2012 (below). While the subprime resets are ending, Alt A and Option ARMs are just beginning.

Figure 3

There will be a very significant undershoot of historically average values, as there always is following a mania (much more than the Case-Shiller projection below suggests). In my opinion, housing prices are likely to fall at least 90% on average. For those who own property on margin, this will be a disaster.

Figure 4

For evidence that this crisis is indeed global, look, for instance, at European housing bubbles, which were worse than in the US.

Figure 5

Figure 6

Unlike inflation, which divides the underlying real wealth pie into smaller and smaller pieces, credit expansion creates multiple and mutually exclusive claims to the same pieces of pie. Once a credit expansion reaches its maximum extent, and contraction begins, these excess claims begin to be extinguished. Unfortunately, the leverage is such that there are probably over a hundred claims to each piece of pie. While contraction begins slowly, as is the nature of positive feedback loops, it picks up momentum until a cascade point is reached, whereupon one can expect the excess claims to be extinguished in a rapid and chaotic process. This amounts to a rapid collapse in the supply of money and credit relative to available goods and services, which is the definition of deflation.

Figure 7

The scale of the problem has been temporarily concealed by a market rally and the shovelling of tens of trillions of dollars of taxpayer’s money into a giant black hole of credit destruction. This has done nothing to reignite lending, but the temporary (and entirely irrational) resurgence of confidence has restored a measure of liquidity. As that confidence evaporates with the end of the rally, that liquidity will also disappear

Banks hold extremely large amounts of illiquid ‘assets’ which are currently marked-to-make-believe. So long as large-scale price discovery events can be avoided, this fiction can continue. Unfortunately, a large-scale loss of confidence is exactly the kind of circumstance that is likely to result in a fire-sale of distressed assets. The structure of the credit default swap component of the derivatives market makes this very much more likely.

The CDS market allowed large bets to be placed on certain prices falling, and by entities which did not have to own those assets. This creates a perverse incentive for some parties to cause others to fail for profit (akin to me being able to take out fire insurance on your house and thereby give me an incentive to burn it down). An added complication is the extreme degree of counterparty risk that resulted from a complete lack of capital adequacy regulation. Many parties with winning bets will not be able to collect, so they may cause financial mayhem for nothing. The CDS market is worth some $62 trillion, and a meltdown is very likely in my opinion.

A large-scale mark-to-market event of banks illiquid ‘assets’ would reprice entire asset classes across the board, probably at pennies on the dollar. This would amount to a very rapid destruction of staggering amounts of putative value. This is the essence of deflation.

I have for a long time argued and believed that there are so many interests vested in protecting our current system that national governments, the IMF and institutions working together would keep the market flooded with liquidity in order to ward off the threat of deflation. In fact, it seems that a prolonged period of inflation is the only way to diminish our debts. I sensed at ASPO International in Denver that this was the majority view. Do you agree that inflation is the most likely near term outcome of current monetary policy?

Figure 8

Absolutely not. I agree that this is the consensus opinion, but I see it as fundamentally mistaken. The debt monetization that is going on has done nothing to increase the supply of money and credit relative to available goods and services, which is the definition of inflation. Credit contraction dwarfs debt monetization, leaving us in a state of net contraction, even though we have just experienced a large rally lasting months, which should have been the most favourable condition for reigniting lending if such a thing were in fact possible. I would argue that it is simply not possible and that deflation is inevitable.

Figure 9

Figure 10

Credit bubbles always end this way, with the mass extinguishing of the excess claims debt represents. They are essentially Ponzi schemes, crucially dependent on the continued buy-in of new entrants. Globalized finance brought a flood of new entrants following the liberalization of the early 1980s, but there are now no more new sources of wealth to tap. Deregulation allowed the reckless to gamble away virtually everything, including bank deposits and pension funds. Globalized finance has created a giant Enron, which while appearing robust is actually almost completely hollowed out. Such structures implode, often without much notice.

Figure 11

In my opinion, deflationary deleveraging will continue until the (small amount of) remaining debt is acceptably collateralized to the (few) remaining creditors. Until that point, there can be no lasting return of the confidence required to rebuild shattered credit markets. Deflation is ultimately psychological. Without trust we will see hoarding of the cash which will be very scarce in the absence of the credit that currently comprises the vast majority of the effective money supply. The combination of scarce cash and a very low velocity of money will be toxic.

Money is the lubricant in the economic engine and without enough of it that engine will seize up as it did in the 1930s, when farmers dumped milk they couldn’t sell into ditches while others were starving for want of the money to buy food. There was plenty of everything except money, and without money, one cannot connect buyers and sellers. Potential buyers will have no purchasing power as they will have lost access to credit and their ability to earn an income will be hit by spiking unemployment. Those who still have jobs will find that they have no bargaining power and there is therefore no wage support. Sellers and producers will have no market and will themselves lose the means to purchase supplies or raw materials for the things they would like to produce. If conditions remain frozen for any length of time, they will go out of business. The deeper the collapse, the more protracted the trough and the more difficult the eventual recovery.

Figure 12

I would argue that we have no need to fear inflation until we have reached a trough - until the deleveraging impulse is spent. We can expect to spend a long time in the liquidity trap, where real interest rates will be much higher than nominal rates, leaving central bankers “pushing on a string”.

Some would argue that faced with the unimaginable specter of deflation that governments will seize control of interest rates from the bond market. Why do you think this may not happen?

The bond market is far more powerful than governments at this point. While the international debt financing model remains, the bond market will retain its power to prevent money printing. Even though governments are not succeeding in increasing the effective money supply for reasons already discussed, they are nevertheless increasing systemic risk with their activities. This is a recipe for very much higher interest rates as a risk premium. Governments do not set interest rates, they decide what rate to defend, but if that rate is substantially different from what the bond market requires, then defending it would be ruinous.

Figure 13

I think we are headed (not imminently but eventually) for a bond market dislocation, with nominal interest rates on government debt spiking into the double digits. This will amount to hitting the emergency stop button on the economy, especially since real interest rates will be substantially higher (the nominal rate minus negative inflation). I am in fact expecting interest rates on private debt to rise before we see problems in the market for government debt, as the latter should benefit substantially in the shorter term from a flight to safety. The risk premium on private debt is already rising, which is a serious danger signal for such thoroughly indebted societies as we see in the developed world.

But stock markets are booming again, several OECD economies are emerging from recession, unemployment has stabilized, there are green shoots everywhere. Surely the current QE strategy is working?

The green shoots are gangrenous. Some of the largest market rallies on record happened during the course of the Great Depression, as depressions are associated with very high volatility. Look for instance at the great sucker rally of 1930. There are always rallies of all different sizes in any bear market, just as there are pullbacks of all sizes in bull markets. No market ever moves in only one direction.

People tend to extrapolate recent trends forward, but this amounts to stepping on the gas while looking only in the rearview mirror. This is one reason why major trend changes are so rarely anticipated. Another is that the prevailing view of markets is fundamentally wrong. There is no perfect information, perfect competition, stabilizing negative feedback, rational utility maximization or efficient markets. Markets are irrational, driven by swings of optimism and pessimism, or greed and fear, in an endless tug of war, and largely in an information vacuum. Investors chase momentum by jumping on passing bandwagons, hence demand for financial assets increases when prices are rising and falls when prices are falling, in classic positive feedback loops.

Figure 14

We have just lived through a period of several months when greed and complacency were in the ascendancy, but that trend is about to reverse in my opinion. Looking at markets as constructs of human herding behaviour allows them to be probabilistically predictable, permitting the forecasting of trend changes. For anyone who is interested in pursuing this idea further, I suggest looking into Bob Prechter’s socionomics - a fascinating subject which delves into the many effects of changes in collective mood.

For instance, as pessimism deepens, driving economic contraction, one would expect to see many manifestations of collective anger and mistrust. As this progresses it is likely to lead to xenophobia and a blame-game, with skillful manipulators (such as the fascist BNP leader Nick Griffin in the UK) poised to direct the anger of the herd towards their own chosen targets. The potential for serious social fragmentation is very high when expectations have been dashed and there is not enough to go around. Having lived through a very long period of manic optimism and increasing inclusion, we in the developed world are not used to expressions of the dark side of human nature, except for entertainment purposes in popular television programmes. It will come as a considerable shock.

Would you care to give your opinion on where the Dow Jones Industrial Average is headed in the near (1 year) and medium terms (2 to 5 years)?

I think the market will fall hard (intervening short rallies notwithstanding) for perhaps 18 months. This was the length of the first leg down (October 2007-March 2009) and so represents a reasonable first guess at how long the next leg at the same degree of trend might last. I think we will see falls of thousands of points in a series of cascades. I don’t see the markets reaching a lasting bottom until probably the middle of the next decade, and even then I don’t expect it to be a final bottom. This has been the largest credit bubble in history, and the aftermath of a major bubble always undershoots where it began before any kind of recovery begins.

Figure 15

The aftermath of the last major mania - the South Sea Bubble in the 1720s - lasted decades and culminated in a series of revolutions.

Figure 16

We are still relatively near the beginning of our own crisis, but already it compares with the Great Depression.

How do you see the US$, gold and oil trading in the same time frame?

I think almost all assets will fall as price support is knocked out from underneath them, but the dollar should rise initially on a flight to safety. Scarce cash will be king for a long time, and the value of one’s currency relative to available goods and services domestically will matter much more for most people than its value relative to other currencies internationally.

In a deflationary scenario, prices fall, but purchasing power typically falls even faster, meaning that everything becomes less affordable despite the lower nominal prices. Prices in real terms, adjusted for changes in the supply of money and credit, are what matter. In a world where almost everything is becoming rapidly less affordable, the essentials will be the least affordable of all, as a much larger percentage of a much smaller money supply will be chasing them. This will confer relative price support.

Although we could initially see a large glut in energy supply as demand falls off a cliff, this is likely to lead to supply collapse as investment dries up, hence I expect energy prices to bottom early in this depression. Both financial and physical risks to energy exploration are likely to increase substantially in a destabilized and capital constrained world, and even maintaining existing assets could become very difficult. This is a recipe for much greater state involvement in ownership and exploitation of (probably deteriorating) energy assets, with increasing conflict over those assets as supply gets dramatically tighter with lack of investment.

As for gold, I expect it to fall initially as people sell not what they would like to, but what they can, in order to raise the cash they need for living expenses and debt servicing. Owning gold is likely to become illegal again (as it did in the Great Depression) in my opinion. This wouldn’t necessarily stop you owning it, but would stop you trading it (at least without taking major risks) for other things you might need. Owning gold now therefore only makes sense if one is confident of being able to sit on it for a very long time, as it will hold its value over the long term as it has for thousands of years.

What will be the consequences for unemployment levels and services provided by government?

Figure 17

Unemployment will go through the roof as the prospects for selling most goods and services decline dramatically. In the developed world we are nations of middle men - generally service economies where we make a living figuratively taking in each other’s laundry. Most of us produce relatively little. Even those who do will find almost no market for their exports, and those who could find buyers may not be able to send shipments as credit contraction prevents shippers from getting the letters of credit they need to ship goods. A glance at what has happened to the Baltic Dry Index (below) indicates the difficulties already facing shipping companies.

Figure 18

Unfortunately middlemen are almost completely expendable, and the services of others are likely to become unaffordable for the majority very quickly. While there will be a huge surplus of labour, and the few who retain purchasing power will be able to hire anyone they want for very little, most people will have to do everything for themselves, as poor people have done throughout history and as most of the population of the world does now. Not only will we lose access to the paid labour of others, but we will lose our virtual energy slaves as well. This will represent an enormous fall in the standard of living for the vast majority.

Figure 19

Whereas inflation can conceal a fall in purchasing power, so that people may not even realize it is happening, deflation brutally exposes it. Wages would have to fall just to keep purchasing power the same, but keeping it the same will not be an option for cash-strapped employers. In addition, with a large surplus of labour, workers will have no bargaining power. This is a recipe for exploitation the likes of which we have not seen for a very long time, but in the intervening adjustment period it is likely to lead first to war in the labour markets.

I would expect general strikes and a breakdown in the reliability of centralized services such as healthcare, education, power systems, water treatment, garbage (and snow) removal etc. This will be exacerbated by plunging tax revenues for all levels of government, which governments will try to compensate for by raising taxes, on anyone still capable of paying, to punitive levels. We would thus expect rapidly deteriorating services at much higher cost.

Figure 20

Figure 21

Many people are at risk of being eventually priced out of the market for goods and services, and particularly the essential ones, entirely. In my opinion, we stand on the brink of truly tragic circumstances.

Figure 22

Figure 23

End note:

The day before the ASPO conference began in Denver, Stoneleigh, Rembrandt Koppelaar and myself took a drive into the Rocky Mountains National Park providing the opportunity to discuss and reflect upon the current global situation. As the week unfolded I realised that I was in denial about the gravity of the global financial situation. In what has become a situation of complexity that is beyond the ken of most folks, I find it simpler to break this down into smaller components that I can relate to.

In the UK, we have an escalating burden of government debt that we can unlikely ever repay. Unemployment is rising, tax receipts are plunging whilst expenditure on social security, health and the elderly go through the roof. We have been living way beyond our means, which with the peaking of UK oil and gas have suddenly become more meagre. We have an election in May 2010. The new government will want to raise taxes and cut public spending. The current reversal in global growth is sending energy prices higher. Higher unemployment, higher taxes, higher energy prices and reduced public services are a toxic mixture for an ailing economy. If the bond market decides to price in the risk premium for escalating debt it will be game over. The questions are if and when? Figure 13 is one of the more interesting for me.

That's me on the left and Rembrandt Koppelaar on the right, contemplating our future after a most enlightening, if not very cold day in the Rocky Mountains. Photographer - Stoneleigh.