The Oil Drum has a post from Tom Konrad looking at the concepts of EROI and EIRR and how they impact the transition to a post-oil world - Managing the Peak Fossil Fuel Transition: EROI and EIRR.
Energy keeps our economy running. Energy is also what we use to obtain more energy. The more energy we use to obtain more energy, the less we have for the rest of the economy.
The concept of Energy Return on Investment (EROI), alternatively called Energy Return on Energy Invested (EROEI) has been widely used to quantify this concept. The following chart, from a SciAm paper, shows the EROI of various sources of energy, with the tan section of the bar representing the range of EROIs depending on the source and the technology used. I've seen many other estimates of EROI, and this one seems to be on the optimistic (high EROI) end for most renewable energy sources.
The general trend is clear: the energy of the future will have lower EROI than the energy of the past. Low carbon fuels such as natural gas, nuclear, photovoltaics, wind, and biofuels have low EROI compared to high-carbon fuels such as coal and (formerly) oil.
The graph also clearly shows the decline in the EROI over time for oil. Other fossil fuels, such as coal and natural gas, also will have declining EROI over time. This happens because we always exploit the easiest resources first. The biggest coal deposits that are nearest to the surface and nearest to customers will be the first ones we mine. When those are depleted, we move on to the less easy to exploit deposits. The decline will not be linear, and new technology can also bring temporary improvements in EROI, but new technology cannot change the fact that we've already exploited all the easiest to get deposits, and new sources and technologies for extracting fossil fuels often fail to live up to the hype.
While there is room for improvement in renewable energy technologies, the fact remains that fossil fuels allow us to exploit the energy of millions of years of stored sunlight at once. All renewable energy (solar, wind, biomass, geothermal) involves extracting a current energy flux (sunlight, wind, plant growth, or heat from the earth) as it arrives. In essence, fossil fuels are all biofuels, but biofuels from plants that grew and harvested sunlight over millions of years. I don't think that technological improvements can make up for the inherent EROI advantage of the many-millions-to-one time compression conveys to fossil fuels.
Hence, going forward, we are going to have to power our society with a combination of renewable energy and fossil fuels that have EROI no better than the approximately 30:1 potentially available from firewood and wind. Since neither of these two fuels can come close to powering our entire society (firewood because of limited supply, and wind because of its inherent variability.) Also, storable fuels such as natural gas, oil, and biofuels all have either declining EROI below 20 or extremely low EROI to begin with (biofuels). Energy storage is needed to match electricity supply with variable demand, and to power transportation.