Synthesizing a barrel of oil requires about 5.7 MWh of electricity at 30% conversion efficiency

Wednesday, November 16th, 2022

The team at Terraform Industries is now 11 people, Casey Handmer says, working towards a near-term future where atmospheric CO2 becomes the preferred default source of industrial carbon:

Our process works by using solar power to split water into hydrogen and oxygen, concentrating CO2 from the atmosphere, then combining CO2 and hydrogen to form natural gas. Very similar processes can produce other hydrocarbon fractions, including liquid fuels. Synthetic hydrocarbons are drop in replacements for existing oil and gas wells and are distributed through existing pipeline infrastructure. As far as any of the market participants are concerned, fuel synthesis plants are less polluting, cheaper gas wells that convert capital investment into steady flows of fuel in a boringly predictable way.

Most recently, Terraform Industries succeeded in producing methane from hydrogen and CO2.

There is nothing particularly special about the technological approach we’re taking. Each of the various parts is built on at least 100 years of industrial development, but up until this point no-one has considered scaling these up as a fundamental source of hydrocarbons, because doing so would be cost prohibitive. Why? The machinery is not particularly complex, but the energy demands are astronomical.


The solar panel industry has been growing by about 25-35% per year for the last decade, making steady progress on cost and becoming a mainstream energy source to the point where its continued displacement of other grid power sources is partly limited only by the battery manufacturing ramp rate, itself redlining at about 250%/year!

Wright’s Law describes the tendency of some products to get cheaper with a growing manufacturing rate. It is not guaranteed by the laws of physics, but rather describes the outcome of a positive feedback loop, where a lower cost increases demand, increases revenue, increases investment, increases cognitive effort, and further lowers cost. For solar technology, the same effect is known as Swanson’s Law, and works out at 20% cost reduction per doubling of cumulative installations since 1976.

This is not the full story, though. Solar has only been cost competitive with other forms of grid electricity generation since about 2011, at which point investment and engineering effort greatly increased. Since 2011 there has been an acceleration of production growth rate and an increase in the learning rate, such that the cost decline is now 30-40% per doubling. For more details, check out Ramez Naam’s excellent blog on the topic.


In particular, the US consumes about 37 Quads of energy for electricity generation, of which about a third goes into wires and the rest is lost in thermodynamic heat loss in generating stations and transmission. Ceteris paribus while solar PV and batteries are much less inefficient, PV capacity factors are limited by daytime sunlight, seasonal daylight variations, poor weather, and mismatches between times of peak generation and consumption. The end state of the solar electricity build out will likely see 3-6x overbuild in nameplate capacity, and large variations in electricity price by time of year, day, and location. These price differences, incidentally, already drive the engine of arbitrage which has turbocharged the battery industry.

Analysts recognize that coal and natural gas used for electricity production will eventually be displaced by renewable generation. Just as converting chemical energy in the form of fuel into electricity endures 45-75% thermodynamic losses, converting electricity back into chemical fuels loses 60-70% of the energy in the process. Converting solar power into natural gas only to burn it in a gas turbine power plant could help with long term seasonal energy storage but is so much less cost competitive than other ways to stabilize electricity supply that we should expect this usage modality in, at most, niche cases.

But what of other uses of carbon-based fuels? In the US, roughly twice as much energy is consumed by transportation, industry, and other uses, as in direct electrical generation. Electrification of cars and trucks proceeds apace but other, more fuel hungry forms of transport including aviation are harder to convert. Fuel uses for high temperature industry will continue to demand non-electrical processes. In particular, it’s easy for industry to transition to purely electrical energy if it’s cheaper for them to use it, but not if it’s not.


13 Quads of electrical consumption in the US will require perhaps 50 Quads of solar generation, profitable deployment of batteries, and no further miracles as displacement occurs organically over the next 10-20 years. 70 Quads of fossil fuel consumption will be displaced by about 240 Quads of solar generation, and there will be a steep price incentive to enable this displacement.

In the US, we are anticipating a 6-10x demand increase once solar costs cross the critical threshold.


What is the solar cost threshold of interest? One barrel of oil contains about 1.7 MWh of chemical energy. Synthesizing a barrel of oil requires about 5.7 MWh of electricity at 30% conversion efficiency. Crude oil prices are between $60 and $100/barrel, indicating cost parity at between $10 and $17/MWh. There are already solar farms installed in some places that sell power at these prices, and between now and 2030 solar costs should come down at least another 60%


  1. bob sykes says:

    Swanson’s Law is misstated. It is actually the doubling of the manufacturing capacity itself, not the cumulative production over time, the produces the 20% reduction in unit costs.

    The talk about wasted energy implies it can be recovered. It cannot. The so-called waste is due to the Second Law of thermodynamics, which prohibits perfectly efficiency processes.

    The best source of the economics of renewables is the blog Manhattan Contrarian:

    He has extensive analyses of the economics of renewables, and they are daunting. The main problem is the batteries needed to even out the intermittent production of electricity by solar and wind. On average, they produce useful power only 10% of the time. The very best coastal sites produce wind power only 40% of the time, and solar is limited to about 25% even in deserts.

    A complete renewable electrical system that replaces all fossil fuels would be at least 3 times the present capacity of the system. The initial cost is several multiples of the GDP. The systems have useful lives on the order of 10 years or so. EV batteries are warranted for 8 years or 100,000 miles. So the annualized cost is something like 50% of GDP forever.

    We’ve had economies based on renewables before. That was the Middle Ages, and the economies were based on slave muscle power. Slavery did not disappear until the slaves were replaced by the Industrial Revolution.

    Renewables will cause de-industrialization, de-agriculturalization, and massive depopulation. At least 90% decline in total world popualtion.

    By the way, that scenario is the goal that has been promoted by Paul Erhlich and other radical environmentalists for the last 50 years.

  2. Gavin Longmuir says:

    The limiting factor in the deployment of Replaceables (not Renewables, since things like windmills, solar panels, and batteries have useful working lives in the order of only 10-20 years) will turn out to be:
    (1) the supply of poor African children to work in dangerous cobalt mines, or
    (2) the supply of Uighur slaves to work in Chinese solar panel manufacturing plants, or
    (3) the eventually limited ability of Western Lefties to continue to ignore the massive human & environmental costs of their foolishness about essential energy supply.

  3. bruce says:

    Terraform Industries is pretty impressive.

    The green energy hoaxes are openly corrupt and fake.

    I hope Terraform Industries succeeds.

  4. Altitude Zero says:

    We’ll see, but I’m not holding my breath, TBH…

  5. David Foster says:

    What are the capital costs of the oil synthesizers? If the plan is to take advantage of the times when solar-generated electricity is cheapest…about 6 hours a day…the capital equipment used for the synthesis will be idle during those times. But the financing costs on the equipment run on for 24 hours a day.

  6. Longarch says:

    If anyone here was playing PC games back around 1998 or 1999, you might recall “Sid Meier’s Alpha Centauri,” which featured “synthetic fossil fuels.” At the time, I thought it to be a pipe dream. Now, I hope that nuclear plant operators will use similar tech to turn landfill plastic into usable oil.

  7. David Foster says:

    Regarding the cost of solar: this natural resources investment firm says that the declining costs of solar and wind have been largely driven by falling costs for the embedded energy in these products, not by production efficiencies.

    Also, there are labor costs associated with the on-site physical installation of solar panels and wind turbines, and these are unlikely to follow the same kind of cost-volume relationships as the components built in factories.

  8. Jim says:

    Atmospheric carbon dioxide, which is highly correlated with global temperature and without which life-giving plants turn brown and suffocate to death, is at its lowest point in 600 million years, and the best and brightest among us want to vacuum this precious and increasingly scarce commodity out of where it’s needed most.

    They want to freeze us all. They want to turn the Earth into a colossal planetary icicle. They want us all chilly and our lips to turn blue and our nipples hard enough to cut glass.

    Leonard Nimoy was so right.

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