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Energy From Oil or Energy From Water?

The late, Dr. Richard Smalley, Nobel laureate in Chemistry said the Terawatt Challenge is to find the “new oil”—a basis for energy prosperity in the 21st century that is as enabling as oil and gas have been for the past century.

According to the US Energy Information Administration in 2006 the world derived its primary energy needs from the following sources.

Fuel type


% Total

Total FF

Non FF




































Roger Pielke Jr. pointed out in this forum a few months ago, “For a world of 9 or 10 billion people to live at the per capita wealth and (highly efficient) energy consumption equivalent of present-day Germany, we will need three to four times as much energy as we consume today. If carbon dioxide levels in the atmosphere are to stop increasing, then nearly all of that future energy consumption must come from technologies that produce zero emissions.”

Smalley said much the same thing, “To give all 10 billion people on the planet the level of energy prosperity we in the developed world are used to, a couple of kilowatt-hours per person, we would need to generate 60 terawatts around the planet—the equivalent of 900 million barrels of oil per day.”

Since oil and gas provided 59.5% and fossil fuels in total provided 86.7% of the total energy used in 2006 and this amounted to 13.62 terawatts, clearly providing 60 terawatts, at least 46 of which are going to have to come from sources that produce zero emissions by 2050 is going to be a daunting task.

In Smalley’s 2004 presentation, Future Global Energy Prosperity: The Terawatt Challenge, he said, “By 2050, if we have solved the problem, the world’s energy breakdown will probably look like a reverse of what it is today. Oil, hydroelectric, coal, and gas (in that order) would supply the least amount of energy, with fusion/fission and biomass processes being somewhat larger players, and solar/wind/geothermal resources providing the majority of the world’s energy. This new breakdown represents a revolution in the largest enterprise of humankind, an energy industry that currently runs about $3 trillion per year.”

Today that industry generates about twice as much revenue.

So how do we solve the problem?

The following graphic, shown in Schalk Cloete’s much debated post The Fundamental Limitations of Renewable Energy provides the answer.


In that post Dr. Cloete claimed, “renewables need to overcome the following two challenges in order to displace fossil fuels in a fair market:

  1. Solar panels and wind turbines need to become cheaper than raw fossil fuels. This is the challenge posed by the diffuse nature of renewables.
  2. Storage solutions need to become cheaper than fossil fuel refineries (e.g. power plants). This is the challenge posed by the intermittent nature of renewables.

First, not all renewables are intermittent.

OTEC, which uses the temperature difference between cooler deep and warmer surface ocean waters to run a heat engine that produces useful work, usually in the form of electricityis, is base load power.

The Perezes cite as the source of the 3-11 TW shown in their graphic; G. Nihous, An Order-of-Magnitude Estimate of Ocean Thermal Energy Conversion (OTEC) Resources, Journal of Energy Resources Technology — December 2005 — Volume 127, Issue 4, pp. 328-333.

The more current paper, An Assessment of Global Ocean Thermal Energy Conversion Resources With a High-Resolution Ocean, General Circulation Model by Krishnakumar Rajagopalan and Gerard C. Nihous points out this was a one dimensional study and that in a full three-dimensional context, OTEC’s net maximum power production increases to about 30 TW.

They hedge this estimate however by stating, “The significant OTEC flow rates corresponding to maximum net power output would result in a strong boost of the oceanic thermohaline circulation (THC). In contrast to simple 1-D analyses, the present simulations of large-scale OTEC operations also show a persistent cooling of the tropical oceanic mixed-layer. This would be balanced by a warming trend in the higher latitudes, which may practically limit OTEC deployment to smaller flow rates than at maximum net power output.”

They put this limit at 14 TW.

The ocean thermal energy conversion counter-current heat transfer system was specifically designed to address the THC and cooling of the tropical mixed-layer problems this and Nihous’ previous paper outlined and thus would enable the ocean’s full 30 TW potential. This approach has yet to be proven however so for the sake of argument it is accepted that 14 TW is OTEC’s limit, which is still about what we are presently getting from all fossil fuels.

So the next challenge is to become cheaper than fossil fuels or at least oil.

Geoffrey Styles responded to my last post saying a, “$10 million Bakken well is likely to yield around $30 million over its life at current oil prices and discounts vs. WTI.”

OTEC plants are effectively hydrogen wells because the best locations are offshore and required the conversion of the electricity produced to an energy carrier to get it to market.

The Hydrogen Economy is a proposed system of delivering energy using hydrogen.

It would be as enabling as oil and gas was in the 20th century.

Hydrogen produced from renewable energy is sometimes considered energy’s Holy Grail.

Currently, global hydrogen production is 48% from natural gas, 30% from oil, and 18% from coal; water electrolysis accounts for only 4%.

Steaming reforming is the cheapest current method of hydrogen production but the chemical equations for the process are:

CH4 + H20 = CO + 3 H2

CO + H20 = CO2 + H2

One unit of carbon dioxide is formed for every four units of hydrogen and currently there is no accounting for the externalities of this greenhouse gas.

Hydrogen from natural gas, used to replace e.g. gasoline, emits more CO2 than the gasoline it would replace, and so is no help in reducing greenhouse gases.

Were sequestration of CO2 mandated, then the costs of reforming and electrolysis would be on par.

The ideal way to form hydrogen is by the electrolysis of water using a renewable energy source and with OTEC this is a necessity to bring remotely generated power to market.

High pressure electrolysis is the most efficient form of decomposing water (H2O) into oxygen (O2) and hydrogen gas (H2) because the gas is formed under pressure thus reducing the energy required to compress it. Electrolysis using OTEC would take place at a depth of 1000 meters and a pressure of 100 atmospheres.

Massive implementation of OTEC and the Hydrogen Economy would go hand in hand.

The estimated cost of a 100MW OTEC plant with electrolyser is $500 million – plant $400 million and electrolyser $100 million, which is the cost Siemens says they can get theirs down to by 2018.

Locally, Nanaimo, British Columbia, a liter of gas costs $1.39/liter which is the equivalent of $5.26/US gallon.

It takes 50kwh to produce a kilogram of hydrogen, which in turn is twice as efficient as a gallon of gas. A 100MW plant therefore theoretically produces 2000 kilograms of hydrogen/hr.

The producer of gas gets about half the $5.26, so this would equate to hydrogen at $5.26/kilogram.

There is a conversion efficiency and storage efficiency penalty to produce hydrogen by electrolysis of 30 and 10 percent respectively so effectively you get 1260 kilograms per hour.

The design life of an OTEC plant is 60 years so you get 662,256,000 kilograms of hydrogen out of the plant at $5.26/kilogram or $ 3,476,844,000 or 6.95 times your investment compared to 3 times for the Bakken oil well.

For the cost of 1 OTEC plant you could drill 50 $10 million oil wells from which you would get a return of $1,500,000,000 or 43 percent of what you would get from the same investment in OTEC.

So the next question is what is a fair market?

According to the International Energy Agency, the fossil fuel industry receives about $550 Billion in subsidies globally each year.

According to a more recent paper published by the International Monetary Fund, “On a post-tax basis which also factors in the negative externalities from energy consumption subsidies are much higher at $1.9 trillion (2½ percent of global GDP or 8 percent of total government revenues).

Taking the IEA figure of $550 billion, if this was invested in OTEC plants the first year you could build 11 hundred 100 MW plants, which in turn would return on average $57,947,400 a year according to the analysis above.

If this cash flow, along with the annual subsidy of $550 billion was reinvested in new plants each year, in 32 years you would have built out the entire compliment of 300 thousand OTEC plants Rajagopalan and Nihous advise the oceans can sustain and the prospects of runaway climate change, sea level rise and proliferating storms would be things of the past.

Since OTEC has the potential to replace all existing fossil fuels, probably twice over, and as the 2010 OECD report, Taxation, Innovation and the Environment, points out, Environmental taxes — such as carbon taxes on CO2 emissions — are an effective way to clean up pollution while lighting a fire under technological innovation, it only seems fair, to say nothing of wise, to shift the world’s annual energy subsidies, or carbon taxes, to OTEC but even if that doesn’t happen it is still a better investment that an oil well in the Bakken field and far more environmentally beneficial.

Not only would OTEC be revolutionary to the energy industry, it is the only case where water is more bouyant than oil.

Jim Baird's picture

Thank Jim for the Post!

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Clifford Goudey's picture
Clifford Goudey on August 27, 2013

Jim, units of energy are kWh whereas kW represents power.  Your introductory material makes little sense.

I think your enthusiasm for the “hydrogen economy” is misplaced.  In most cases it still requires a thermal process to convert it into useful electrical power.  There are yet to be solved problems in its storage and transmission.  I doubt it will ever become competitive for general use.  Furthermore, building your case on the claims found in Cloete’s posts does not represent a solid basis for your arguments.

I also sense you underestimate the environmental consequences of a large-scale OTEC deployment.  The climate-change benefits you (elsewhere) cite are speculative.  The disruption of local ecosystems is unavoidable and likely unacceptable.  The best bet for OTEC is the direct production of electrical power in support of well-placed island communities that lack acceptable wind or wave resources. Such locations offer a potentially profitable niche for OTEC if the lingering technical problems can be solved, but as such it will not become a major player in global power production.

Clifford Goudey's picture
Clifford Goudey on August 27, 2013

Sorry, I wasn’t clear.  Watt is a unit of power.  W x time is a unit of energy.  So using W, kW, MW, GW, or TW to represent energy is incorrect.  For example, if in 2006 average power generation was 13.62 terawatts, then the energy consumed in 2006 was 119,311 TWh of energy.

I agree that subsiding the fossil/nuclear status quo is a dead end.  OTEC may be 24/7, but if it must be converted to a storage medium for transport to market it looses a lot of its luster.

Gal Sitty's picture
Gal Sitty on August 27, 2013

I fail to see how OTEC could meaningfully offset oil consumption. It seems to me that “energy” produced from OTEC would come in the form electricity. If this is true, given electric vehicle’s still miniscule market penetration and cost issues, more electricity (or cheaper electricity) could not meaningfully reduce oil consumption since oil is mostly used for transportation.

Gal Sitty's picture
Gal Sitty on August 27, 2013

Jim, thanks, good to know how it’s delivered. While fuel cell technology in vehicles hasn’t really been done to scale yet, or cost-competetive with oil yet, but methanol has potential to reduce oil consumption. 

Nathan Wilson's picture
Nathan Wilson on August 27, 2013


If the proton-conducting ceramic (PCC) fuel cell development is successful, then it will be possible to generate ammonia (NH3) from steam and electricity in one step (plus the trivial step of separating nitrogen from the air, which is done using adsorption, as in home oxygen generators which are available from any medical supply store).  These PCC devices (which have been prototyped at laboratory scale) can be operated in reverse, producing fuel instead of consuming it: if nitrogen is provided at the hydrogen electrode, NH3 (which forms at a lower cell voltage than gaseous H2) will be formed instead of H2. 

The motivation for ammonia is that it effectively solves the storage and transportation issues that plague H2 systems.  In automotive applications, ammonia has double the energy density of 10,000 psi hydrogen (at worse-case ambient temp),  it works with ceramic fuel cells (like this one I think), plus it can be burned in a modified internal combustion engine with better efficiency than gasoline.

For pipeline applications, a given size pipe can carry 50% more energy in the form of ammonia than natural gas, and almost double the energy capacity of a hydrogen carrying pipe.  In this thesis, Bartel found that for a 1000 mile long pipeline, ammonia transportation is also more efficient that for hydrogen (93% vs 87%).

For transportation in non-pressurized refrigerated ships, ammonia has 70% higher energy density than liquid hydrogen.  Starting from gaseous H2, the energy cost is lower to convert it to ammonia (under 15%) compared to liquefying it (about 30%).  Plus the ammonia only requires chilling to -33C, whereas H2 is a hard cryogen at 20K above absolute zero.  

For seasonal load leveling (e.g. for winter heating fuel) ammonia is again the best solution, since refrigerated ammonia tanks can be built the size of warehouses, with very low energy consumption.  Gaseous H2 can be stored in large underground caverns, but this requires special geology.

Advanced CO2 capture technology may someday allow OTEC systems to capture CO2 from seawater (only mobile OTECs can do this, since the collection area must be large).  This will allow conventional hydrocarbon fuel to be synthesized, but this will surely lower the efficiency and raise the cost of the resulting fuel.  That might be acceptable for premium applications like aviation or motorcycles, but for automobiles, low cost will carry the day.

Robert Bernal's picture
Robert Bernal on August 30, 2013

Wouldn’t OTEC on the global scale disrupt ocean currents or intermix cold and warm waters… too much? The last thing we need is methane release due to (even more) warming of the oceans.

Hopefully, my concern is overly exaggerated, though.

Clifford Goudey's picture
Clifford Goudey on August 30, 2013

Jim, you bring up an interesting point.  While you are correct that much of the heat of AGW is getting stored into the deep ocean, extracting that heat in the form of useful energy is not getting “this heat out” of the global system.  Since all energy is ultimately turned into heat, this effectively returns it to the atmosphere where is further contributes to climate change and to the melting of the glaciers and the arctic and antarctic land-based icecaps, driving sea-level rise. Furthermore, the cooling of warm surface water by mixing in cold deep water will reduce the radiative cooling from the oceans back into space. 

By this admittedly simple analysis, the approach you suggest needs rethinking.

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