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close this bookBioconversion of Organic Residues for Rural Communities (UNU, 1979)
close this folderAnalysis of energy cost of integrated systems
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View the documentEnergy cost and energy requirement
View the documentWhy energy analysis?
View the documentNet energy intensity
View the documentWhat criteria are offered by energy analysis?
View the documentConclusion
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Why energy analysis?

Economic analysis recognizes that time is a non-renewable resource, so the unit of money today is more valuable than the same unit a year hence; in other words, future income and expenditure are discounted. To be meaningful, this discount rate must exceed the inflation rate, and the difference between these two values dictates the time horizon in the calculation. Ten per cent restricts the time horizon to about seven years; 2 per cent widens it to a century.

In these uncertain days, choosing an appropriate discount rate is more of a value judgement than a careful economic calculation. However, in principle, given sufficient information about costs and prices and markets, calculation can assess whether this or that activity, such as the conversion of organic residues, is a viable activity. What often renders such calculation suspect is the uncertainty surrounding so many of the factors, coupled today with the extreme uncertainty about discount rates and the price of energy. It is thus extremely easy to swing the "economics" in favour of a project or against it according to a broad range of quite reasonable assumptions. Admittedly, if it is proved that such and such a project yields a 100 per cent internal rate of return even in inflation-ridden Chile or Brazil, then it is certainly likely to be worth backing. But much of what we have to deal with lies in areas of much greater uncertainty. Energy analysis seeks to remove a great deal of that uncertainty, but does so at the expense of some loss of information.

As I indicated earlier, money cost enters into ail of the factors of production. Energy requirement looks at only one: the consumption of stored fossil or fossil energy. The problems of inflation, of discount rates, or judging future prices are not considered. On the other hand, the energy requirement of a product reveals nothing about the value the market puts on that product. That remains an empirical, behavioral observation. Many economists view this deficiency to be so great that it renders energy analysis useless, and even worse, to be apparently propagating a single-factor theory of value. This is because economists view energy as just one more input in the production system, rather than a factor like time - a resource that can be used once and only once.

Energy has a unique role. Elsewhere I have argued (6), as have others (7), that, given energy and technology, we can never actually run out of resources. They are abundant, but becoming harder and harder to exploit, and that difficulty can be most conveniently measured in terms of resource energy requirement. Even capital can be so measured, and the problem that is increasing rapidly in the world is the need to devote more and more capital and energy to obtain energy, thus expending more capital to get at resources. It follows that the wise and efficient use of energy is not merely an economic objective, but can reduce a community's capital expenditure.

Thus, an energy analysis that demonstrates the least energy-intensive route to a given product can be a most valuable criterion in system selection, but with a very important caveat: performance must be equal. By performance is meant the provision of the same service or the same intensity of production. For example, it is not unusual to find, in manufacturing processes, that the least energy-intensive route is often the most automated route, and thus the least labour-intensive. Energy minimization calculations have proved to be an excellent guide to the viability of house insulation. When energy analysis is used to account for biosystems, research workers frequently overlook the need to compare similar performance, e.g., similar intensities of production expressed in kilograms of product per unit land area.

Some carefully executed work by US researchers illustrates this point. Pimentel et al. (8) studied corn production, while Rawitscher and Mayer (9) examined energy expended in harvesting various kinds of seafood. In both instances figures show the energy consumption per unit of product without reference to intensity of production. In neither study did calculations go back to the same system boundary as money. The now well known paper of Pimentel et al. (8) on corn production as a function of time falls into an orderly pattern in terms of intensity of production, and his data appear as six points on the curve shown here in Figure 2.

Rawitscher and Mayer (9) discovered enormous variations in the energy requirement for harvesting different types of seafood, and drew some unwarranted conclusions from that information, yet the parallel study of Edwardson (10), who did measure intensities, shows that fish farming data fit on the same curve of production intensity versus energy intensity that is found with normal land-based cultivation.

In considering the analysis of energy costs of integrated systems, from an energy analysis perspective it makes no difference to the procedure whether the system is integrated or not. The judgement lies in comparing the energy analysis of an unintegrated as opposed to an integrated system. It should always be remembered that systems are there to serve people; people eat food and consume goods, and people generate their own energy requirements; this, too, should enter into the calculation.

Thus, energy analysis leads to a series of numbers, initially expressed as so much energy per product, and should be related to the level of intensification and integration (Figure 2). The next step, upon which much research still remains to be done, is to link energy requirement to relative costs. It is now increasingly appreciated (1, 111 that a doubling in the price of energy can eventually double prices, and that energy requirement influences the rate of change.