This paper is about the energy return of investment.
Energy has a significant impact on economic growth and is a key driver for the wellbeing of a society. The less a society has to spend on energy, the more remains for consumption and discretionary spending that is directly translated into economic growth.
This impact can be assessed with the help of the net energy analysis that makes use of the concept of EROI. The Energy Return On Investment is the ratio of the quantity of energy delivered to the quantity of energy consumed in a given process. Thus, this metric serves to measure the accessibility of a resource, meaning that the higher the EROI, the greater the amount of net energy delivered to society in order to support economic growth. This goes hand in hand with the finding that there is a minimum level of EROI that has to be reached, otherwise economic growth cannot be possible.
Given that net energy analysis is going to be one of the most fundamental concepts in academic and policy discussion in view of the future of the energy mix there is still a clear need for a standardized and independent framework to calculate EROI.
Table of Contents
- 1. Motivation
- 1.1. Energy as an essential factor of production
- 1.2. Energy surplus as a necessary criterion for survival
- 2. EROI and its implications
- 2.1. The concept of EROI
- 2.1.1. Definition of EROI
- 2.1.2. Consistent framework for EROI
- 2.1.3. Different versions of EROI
- 2.1.4. EROI trends for oil
- 2.2. The minimum EROI for society
- 2.2.1. Bottom-up approach: Energy value chain
- 2.2.2. Top-down approach: Economic cost of energy
- 2.3. Applications
- 2.3.1. Corn-based ethanol
- 2.3.2. Comparison of alternative energy sources
- 2.3.3. Ideal EROI
- 2.4. Criticism
- 2.4.1. Lack of standardization
- 2.4.2. Disregard of energy quality
- 2.4.3. Lack of objectivity
- 2.4.4. Insufficiency of the concept
- 2.5. Implications
- 2.5.1. EROI and economic growth
- 2.5.2. EROI and Monetary Return On Investment
- 2.5.3. The paradox of oil
Objectives and Key Themes
This work aims to explore the significance of Energy Return on Investment (EROI) as a crucial factor influencing economic growth and societal well-being. It examines the concept of EROI, its calculation, and its applications in assessing the sustainability and economic viability of various energy sources, including renewable energy options. The text also delves into criticisms of the EROI concept and its limitations.
- The role of energy in economic production and growth.
- The concept of EROI and its calculation methods.
- The minimum EROI required for societal sustainability.
- The application of EROI in evaluating different energy sources.
- Criticisms and limitations of the EROI concept.
Chapter Summaries
1. Motivation: This chapter establishes the foundational importance of energy in economic production. It discusses the ongoing debate among economists regarding energy's role as a primary production factor, contrasting mainstream economic views that downplay its significance with alternative perspectives that emphasize its crucial role, particularly in the context of historical energy crises. The chapter highlights the work of Georgescu-Roegen, Ayres, and Kümmel, who have advocated for a more prominent recognition of energy's influence on economic systems. It introduces the concept of energy surplus as a necessary condition for societal survival and evolution, setting the stage for a detailed exploration of EROI in subsequent chapters.
2. EROI and its implications: This chapter provides a comprehensive overview of the Energy Return on Investment (EROI) concept. It begins by defining EROI and outlining various approaches to its calculation, acknowledging different methodologies and potential inconsistencies. The chapter then explores the critical concept of the minimum EROI required for societal sustainability, examining both bottom-up (energy value chain) and top-down (economic cost of energy) approaches. Several applications of EROI are presented, including its use in comparing the economic viability of different energy sources (such as corn-based ethanol and other renewable energy technologies) and in identifying the "ideal" EROI. The chapter concludes by addressing criticisms of the EROI concept, such as its lack of standardization and potential disregard for energy quality, acknowledging the limitations while emphasizing its overall importance in energy and economic analysis.
Frequently Asked Questions: Energy Return on Investment (EROI)
What is the overall topic of this text?
This text comprehensively explores the Energy Return on Investment (EROI) concept, its implications for economic growth and societal sustainability, and its applications in evaluating various energy sources. It examines the definition, calculation methods, and criticisms of EROI, as well as its role in assessing the viability of different energy technologies, including renewable energy options.
What are the main objectives of this work?
The primary objective is to analyze the significance of EROI as a crucial factor influencing economic growth and societal well-being. It aims to clarify the concept of EROI, its calculation methods, and its practical applications in assessing the sustainability and economic viability of diverse energy sources. Further, it aims to critically evaluate the limitations and criticisms levied against the EROI concept.
What are the key themes covered in the text?
Key themes include the role of energy in economic production and growth; the definition and calculation of EROI; the determination of the minimum EROI needed for societal sustainability; the application of EROI in evaluating different energy sources (e.g., corn-based ethanol, renewable energy); and a critical analysis of the limitations and criticisms of the EROI concept. The text also highlights the perspectives of economists like Georgescu-Roegen, Ayres, and Kümmel regarding the importance of energy in economic systems.
How is EROI defined and calculated?
EROI (Energy Return on Investment) is defined as the ratio of energy produced to the energy invested in producing it. The text discusses various approaches to its calculation, acknowledging different methodologies and potential inconsistencies. It distinguishes between bottom-up (energy value chain) and top-down (economic cost of energy) approaches to determining the minimum EROI required for societal sustainability.
What is the significance of the minimum EROI for society?
The text emphasizes the critical importance of the minimum EROI required for societal sustainability. It analyzes this minimum EROI using both bottom-up (analyzing the energy value chain) and top-down (considering the economic cost of energy) perspectives. A sufficiently high EROI is crucial for maintaining economic growth and societal well-being.
How is EROI applied in evaluating energy sources?
The text demonstrates the application of EROI in comparing the economic viability of different energy sources. Examples include the analysis of corn-based ethanol and a comparison of various renewable energy technologies. The concept of an "ideal" EROI is also discussed.
What are the main criticisms and limitations of the EROI concept?
The text addresses several criticisms of the EROI concept, including its lack of standardization, potential disregard for energy quality, perceived lack of objectivity, and potential insufficiency of the concept itself. Despite these limitations, the text underscores the overall importance of EROI in energy and economic analysis.
What are the implications of EROI for economic growth?
The text explores the relationship between EROI and economic growth, highlighting the critical role of energy in economic production. It also examines the connection between EROI and Monetary Return On Investment (MROI), and discusses the "paradox of oil" within this context.
What is the "paradox of oil"?
The text mentions the "paradox of oil," suggesting an inherent contradiction or tension related to oil's role in the economy and its EROI. Further detail on this paradox would require consulting the full text.
- Quote paper
- Anna Szujo (Author), 2016, Energy Return On Investment with the concept of EROI. Applications, criticism and implications, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/992623
