Monday, September 28, 2009

Energy Economics

The debate around meeting energy demand is always a controversial subject as there is always some form of trade-off between local effects, consuming scarce resources and economic growth. Many people hope for perfect solutions where there are no local effects, no consumption of scarce resources and plenty of energy. Many are so hopeful of such a nirvana that, believing the barriers to such outcomes are purely economic, they make suggestions that can look sensible. Most of the time, however, the barriers aren't purely economic but are physical. While some might say that if a project doesn't meet economic standards then this is just a cost that has to be worn for social or environmental benefits. However, there is 'energy economics' that must also be satisfied or else we will simply consume more to meet the energy demand than we otherwise would have done.

In other words, we should generally use the most energy efficient ways to make energy available for human use to lessen primary energy consumption. The fact is that everything uses energy to make to a greater or lesser extent. Even things that 'make' energy are made with energy; some of them use a lot of energy to make. A minimum requirement for the bulk supply of any countries energy needs is that (over the lifetime of each project) the energy supplied should exceed the energy consumed to create the supply. Overall preference should also be given to those supplies that 'payback' the fastest. That is to say the energy supply that most quickly repays the energy it took to build.

In the real world projects must make economic sense more broadly but clearly the 'energy economics' case must be met. The problem with many suggestions around particularly small scale and distributed generation is that the energy paybacks tend to be quite poor. This is why energy can get very complicated.

There are economies of scale in energy production. This economy of scale generally applies on a pure energy basis as well. In other words large energy production facilities use less energy to build per unit of output than smaller facilities. And, some technologies are less energy intense than others. Photovoltaics, for example, are very energy intensive to make and so is the support technology it takes to make PV cells practically useful. While it's true that PV panels use free energy to make electricity this is not necessarily true of their production.

It can seem sensible that a large gas turbine is more polluting than the equivalent number of PV panels but the reality is not that simple. The PV panels required to produce the same as a large gas turbine take an enormous amount of energy to make (which is why they are still relatively expensive). As the energy to make the PV panels is generally produced overseas (with the accompanying emissions) then the PV panels look good. On a total lifecycle basis, however, including the total energy to manufacture, utilise and dispose/recycle the case for PV panels is far less clear.

I'm not trying to say that PV panels might have their place or that they do not stack up. What I am saying is that the issue is rarely as simple as if first looks. When it comes to producing energy there is always a piper to be paid.


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