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Energy analysis: A review of methods and applications
O,VIEGA, The Int. JI of Mil~at Sci., Vol. 4, No. 1, 1976. Pergamon. Press. Printed in Great Britain
Energy Analysis" A Review of Methods and Applications PETER CHAPMAN (Received June 1975; in revised form September 1975)
The paper describes the aims and applications of energy analysis, emphasising its role as a complement to conventional financial analysis. It is shown to provide useful insights in applications such as forecasting price rises due to a fuel price rise, calculating the net costs of fuel obtained from unconventional sources, forecasting energy demand and evaluating energy conservation schemes. Although the field is still young, and most activity is in compiling reliable data bases, its systems approach and methods promise to make it a useful tool for evaluating patterns of resource uses.
1. I N T R O D U C T I O N E N E R G Y analysis is a systematic way o f tracing the flows o f energy t h r o u g h an industrial system so as to apportion a fraction o f the primary energy input to the system to each o f the goods and services which are outputs o f the system. The result o f an energy analysis is a set o f 'gross energy requirements' (get) for all the commodities produced. W h e n applied to a national economic system then the quantities o f all the commodities produced, each multiplied by its respective gross energy requirement, will add up to the primary fuel input to the system. Thus, an analysis which concludes that the get o f a loaf o f bread is 20 M J ' implies that the production o f a loaf o f bread required the removal o f 20 MJ of primary energy f r o m some energy resource stock. Some would be used in extracting the fuel and converting it to a form suitable for use, some would be used in transporting commodities between various stages o f production, some would be used in producing materials and equipment used in the processes and some would be used as a direct process input, such as the fuel for ovens. Energy studies were given a large impetus by the oil price rise in 1973 so that although the methods o f energy analysis were used prior to 1973 most studies have been carried out in the last 2 years. The very rapid development o f the subject has given rise to misunderstandings as to its aims and range o f application. The purpose o f this paper is to clarify the aims and applications o f energy analysis. To accomplish this it is necessary to discuss the methods o f analysis and the conventions used (Section 2); to relate energy analysis to financial Note that 1 MJ = 0.28 kWh = 9-5 x 10 -3 therms = 950 Btu. 19
Chapman--Energy Analysis analysis (Section 3); and to discuss some of the applications of energy analysis (Section 4). This will make it clear that energy analysis is not an alternative to economic analysis but a way of refining certain parts of economic analyses. Energy analysis can complement economic analyses since it can be directly related to the state of technology and its methodology involves examining the whole industrial system, not a single firm. These two aspects of energy analysis are illustrated in the examples given and used to give some information about future costs.
2. M E T H O D S There are three basic methods available for evaluating the gross-energyrequirements of goods and services, namely statistical analysis; input-output analysis and process analysis. These have been described in detail elsewhere [I0, II, 19] and their relative merits discussed. Briefly the problems and advantages of these methods are Statistical analysis: Uses published statistics as data source. Able to compare technologies where suitably disaggregated statistics exist. Not usually possible to find comprehensive statistics on all inputs to processes except for census data. Published statistics may contain significant errors, especially due to double counting [2]. Input-output analysis: Based on published economic input-output tables. Degree of aggregation fixed by the table, cannot compare different processes for same commodity. Errors due to preferential prices and statistical adjustments needed to balance table. Advantage--that it takes into account all indirect effects. This method gives the ratio of the total energy input to the financial value of the output, referred to as the energy intensity, for an industry or commodity group [24, 49, 50]. Process analysis: Based on detailed evaluation of process inputs often in cooperation with producer. The only technique for comparing processes and technologies in detail. Problems in deciding where to draw system boundary [10, 19]. Needs data from one of above methods to determine ger of minor inputs (otherwise one process analysis leads to analysis of all production). In August 1974 an international workshop considered the methods and conventions of energy analysis and agreed a basic set of ground rules which are common to all the above methods [19, 38, 46]. However, these conventions are necessarily incomplete and any particular study must add its own conventions, based on the aims of the particular investigation. The most important factors which have to be chosen are those relating to (a) the definition and energy content of primary fuel inputs: should solar energy be counted? should uranium be counted on its theoretical energy content ? (b) the definition of the system analysed: in particular this requires specification of the ger of imports. 20
Omega, VoL 4, No. 1
(c) the partitioning of energy used in co-production processes or common services: this is particularly important if the problem posed involves changing the quantity of output for just one of the co-products. The fact that different investigations, seeking answers to different questions, may use different conventions in the above respects means that care is necessary in interpreting the results o f energy analyses. The conventions used in an analysis are not arbitrary but must be chosen to suit the definition of the problem under investigation [I0]. For example in evaluating the ger of a loaf of bread some convention is needed to establish the get of imported wheat. If the study has the aim o f evaluating the fraction of U.K. primary fuel used in the production of bread then the only energy requirement is for transport of the imported wheat from dock to bakery. However, if the study were evaluating the total energy sequestered from the world stock o f energy resources for the production of bread then the imported wheat should be given a ger which reflected the energy expended in its production and transport from the exporting country. Clearly these studies will result in different numbers for the ger of a loaf of bread. There is no sense in which one number is more 'correct' than the other, but the subsequent application of either result would have to be consistent with the convention used in its evaluation. A similar problem of interpretation has arisen as a consequence of energy analyses of nuclear power stations. At least one author has seen the confusion and misinterpretation of results as sufficient grounds for questioning the validity of energy analysis [28]. However, it is clear that an investigation which asks "how much fossil fuel energy is required to build a nuclear reactor ?" will produce a different answer to one which asks "how much fossil fuel will we save by substituting a nuclear power station for a coal-fired station" since the latter question presumes a substitution not considered in the former. Provided these differences are taken into account then all the analyses of nuclear power are consistent. Recently Hill and Walford [25, 28] have attempted to divide energy analyses according to the aims of the investigation. This has led them to suggest that there are six methods of energy analysis. This classification, which confuses methods and aims, is not helpful since in practice most analyses subscribe to more than one aim and use most, if not all, of the methods distinguished by Hill. A significant feature of most energy analyses carried out to date is that they are mostly concerned with evaluating the average ger of a good or service. However, this may be inappropriate when the energy analysis results are to be used in comparing alternative policies which involve change. For example the average ger of passenger transport by road and rail incorporate the present loadfactors of both systems and suitably amortised fractions of the ger of capital items such as roads and rolling stock. A small s h i f t of passengers from one transport mode to another might not incur a n y change in capital and may 21
Chapman--Energy Analysis simply change the load-factors of both systems. Under these conditions the change in energy consumption would be more accurately calculated using marginal energy requirements, not average energy requirements. If policies were contemplated which involved a massive shift of passengers from one mode of transport to the other, then it is likely that the most significant factor in energy use would be the energy required for the immediate capital investment [11, 12]. Thus for policy applications the present practice of evaluating average ger is not appropriate. This is an area where the methods of analysis and presentation of results could be significantly improved. 3. R E L A T I O N
TO
FINANCIAL
ANALYSIS
A conventional financial analysis considers costs in terms of factor payments. In addition to payments to labour and capital there will also be payments for items purchased from other suppliers. A new aluminium smelter would include payments for electricity, bauxite, carbon anodes, etc. This procedure takes no special note of how the suppliers of these items arrive at their costs (or prices) so it is impossible to determine how sensitive the total cost estimate is to commodity prices. For example, increasing the price of oil or the average wage rate would affect all the items listed above, but each to a different degree. In the conventional analysis the system studied is the firm and the exchanges across the system boundary are described in terms of the prices of the commodities exchanged. The justification for this lies, ultimately, in the belief in the 'perfect market' theory of price determination. The perfect market theory assumes that all producers and consumers have perfect knowledge of the present and future availability and production costs of all commodities. Were this the case then the conventional analysis, based on prices, would give all the information required for an investment or policy decision. However, this is not the case. Knowledge of the present is not freely available and knowledge of the future does not exist, so present prices cannot give information on the future availability or production costs of commodities. 2 Clearly any future changes in the availability or costs of production will eventually be experienced as price changes, but the point is to try to anticipate these changes. There are many factors, such as cartel formation, union action, government taxes and subsidies, which will affect future prices which cannot be anticipated by any method of analysis. However, there are also technological features of availability and production costs which are amenable to analysis. This can be illustrated by considering an alternative way of estimating the total financial cost which involves choosing a set of basic commodities and evaluating the total quantity purchased including direct and indirect inputs. z Some analysts have argued in a circle by trying to deduce information about the future from present prices. Clearly if the market were perfect, a necessary condition for prices to contain future information, then everyone would have perfect information about the future without recourse to analysis ! 22
Omega, Vol. 4, No. 1 If the quantity of commodity i is Q, per unit output and its price P~ then the total cost estimate, per unit output, C, is C = L'PI Qii
(1)
This type of commodity analysis can be applied to any number of basic commodities, although care is necessary to avoid double counting. 3 Energy analysis is a type of commodity analysis since it sets out to evaluate the total quantity of one commodity, fuel, used in the production process. Energy analysis can be related to financial analysis by considering the subdivision of all the factor inputs to a production process, as shown in Fig. 1. Ultimately all the factor inputs result in a 'personal income'. However, for the purpose of this
Labour Labour
Profits and interest
E 0 t~ c
Land 0 L~
e3
Lobour
Plant, machines
Land
Materials L Fuel
[",.. Profits and interests
Transport
Lot)our F""--. Materials
Capital Fuel
[ [
"'C ".. Fuel
Fuel
FIG. 1. The division and subdivision of factor payments into 'payments to personal income" and 'payments for fuel'.
analysis payments to the fuel industries are held separate and represented by a quantity of energy times a price of energy.4 Thus, in terms of an energy analysis framework the total cost per unit of output, C, is given by 3 Evaluation of commodity inputs can be accomplished using I/O tables, see Ref. 49. The problem is that I/O tables are usually too aggregated to be useful. The justification for not dividing fuel payments into personal incomes is that a large fraction of fuel payments is to an external cartel. Furthermore, the price of other fuels will rise towards the cost of this monopolistically controlled fuel price since there is a large degree of substitution possible between fuels.
23
Chapman--Energy Analysis C----p, E q - ~ P j J where E
(2)
price per unit energy ---- energy per unit output (i.e. ger of output) personal incomes for labour, finance, land, etc. =
This immediately enables the effect on costs of a change in the price of energy to be calculated as zlC = ,4p,.E.
(3)
This method of predicting the effect of fuel price rises can be extended to incorporate different rises for different fuels (e.g. Ref. 6). As explained below, energy analysis may also have a role to play in estimating the future price of fuels relative to other commodities.
4. APPLICATIONS OF ENERGY ANALYSIS There are probably as many reasons for performing energy analyses as workers in the field. However most of the published studies fall under one of the following general headings: 1. 2. 3. 4. 5. 6. 7.
evaluation of energy policy, energy sources, etc. [12, 15, 21, 25, 40, 42, 43]; effects of fuel price rises [6, 37]; evaluation of conservation measures [14, 22, 27, 36]; energy use in agriculture [29, 39,47]; energy and material resources [2, 7, 13, 16, 31, 41]; energy use in transport [2, 26, 33, 34]; energy and product design, technical change etc. [1, 3, 4, 5, 23, 35, 49].
Most of these studies are concerned with the evaluation of energy requirements or energy intensities. Whilst most studies relate their findings to policy issues, only a few have any direct application. This is a reflection of the youth of the subject and the fact that a considerable data base is necessary before direct applications can arise. The most constraining factor in energy analysis at the moment is the availability of reliable data and it is in this area where most activity currently takes place. In principle, once collected this data should lead to a number of important applications. At the moment these can only be illustrated by incomplete studies, but they do show how the subject could develop into a useful policy tool. (a) Effect offuel price rises The division of commodity inputs into payments to 'personal incomes' and to the fuel industries, as shown in Fig. I, allows the effect of fuel price rises to be 24
Omega, VoL 4, No. I calculated according to one of two assumptions. Either 'personal incomes' (excluding those derived from employment in the fuel industries) maintain their real purchasing power, in which case all prices rise in proportion to fuel prices, or it can be assumed that personal money incomes remain constant, in which case the price rise can be calculated using equation (3). In practice neither assumption holds, there is some loss of purchasing power, but not in direct proportion to the fuel price rise. However, for the more energy intensive industries the calculations based on equation (3) do give a good indication of which prices are likely to increase the most. Table 1 shows the range of price TABLE 1. COMPARISON OF CALCULATED AND OBSERVED PRICE RISES FOR BUILDING MATERIALS O b s e r v e d rise
Timber Sand Bricks Paint Mild steel Cement Plaster P.V.C.
Calculated rise (%)
(Dec. 73--Dec. 74) (V.)
6-7 7-25 11-16 18-28 19-25 35-37 13-15 30--40
0 20 26 33 34 36 42 50
rises calculated using different estimates of energy requirements [6, 17] and the actual price rises observed from December 1973 to December 1974 [9] for a number of building materials. Except for 'plaster' the ranking of the calculated price rises agrees with the observed rises, s For less energy intensive products there is significantly less correlation between calculated and observed price rises. (b) Oil shales Energy analysis may have a special role to play in refining the financial analyses of future energy sources. This is perhaps best illustrated by the recent reports [44] of escalating costs of oil shale production. " I n the past each time the price of oil went up, shale oil companies promptly declared that their time had finally come . . . . Now companies which once said shale oil would be profitable at $5.0, then $7.50, then $11.0 a bbl are hard pressed to name any figure at all." According to equation (2) the costs of producing a barrel of oil from oil shales can be written as C = p, E + P (4) n Note that the lower than predicted price rise for timber could be accounted for by the very large increase in timber prices prior to December 1973 due to the increase in demand. 25
Chapman--Energy Analysis
where P represents the sum of all personal income payments. If we accept an estimate of C = $6/bbl when OPEC oil was $2.5/bbl, and the present estimate that C = $12/bbl when OPEC oil is $10/bbl, then we can estimate E by assuming a rate of inflation for P, the personal income payments. Assuming that the price of energy (p,) is tied to the price of OPEC oil and that in the period considered the personal income payments inflate by 20 per cent then we have 6 = 2"5E-bP
12 = 10E-q- 1-2P giving E = 0-69 bbls oil input/bbl oil output. Thus the price escalation could be explained by a very high energy input needed per unit energy output. The above calculation should not be considered as a way of calculating E since the final result is very sensitive to the cost estimates (which until recently were probably not much more than guesses) and the inflation factor assumed for personal incomes. The most reliable way of estimating E is by performing a detailed energy analysis of the process. Given an accurate estimate of E then the price of oil at which oil shales are economic is given by P p, $/bbl. (5) (I--E) This assumes that all the energy inputs are at the prevailing oil price. Essentially the energy analysis of energy resources points to a feedback between inputs and outputs which could be overlooked in a financial analysis. Although a financial analysis could accommodate the feedback due to the direct consumption of fuel it could not take into account all the indirect fuel consumption without resorting to an energy analysis procedure. It should be noted that equation (5) shows that the relative prices of energy derived from different sources depends upon two factors, the payments to 'personal incomes' P, and the net energy yield, (1--E). It is possible that some of the previously uneconomic energy sources now being considered as substitutes for OPEC oil could be even more expensive than anticipated due to the 'net energy' term. For example it has been estimated that uranium could be recovered from Chatanooga Shales at $70/lb U308 [8] compared to present uranium prices of $10/Ib U3Os. Energy analyses of the production processes involved [12] shows the Chatanooga shale to be significantly more energy intensive than present mining with the result that the recent oil price rise only increases the price of $10/lb uranium by 5 per cent but the $70/lb uranium rises by 30 per cent. 6 The energy requirement for uranium from Chatanooga shales published in Ref. 12 is incorrect. Correction to the water and sulphuric acid inputs give an energy requirement of 7.11 x 106 kWht/ton U3Oe. 26
Omega, Iiol. 4, No. 1 (c) Long-term price trends of materials The theoretical minimum of energy required to mine enough ore to produce a ton of metal is inversely proportional to the ore grade. The theoretical minimum of energy is required to remove the ore from the ground and to crush the ore prior to separating the mineral particles from the dirt. Over the past 70 years the average grade of copper ores worked has declined from about 2-5 ~ Cu to less than 1 ~ Cu, with the U.S.A. currently exploiting ores containing less than 0 . 5 ~ Cu [30, 32]. Thus, over this period the theoretical energy required to mine 1 ton of copper has increased. Over the same period there have been technical improvements in the efficiency of using fuels to perform the transport and crush ores. However, these technical improvements, particularly in the design of engines, electricity generators and crushing machines, are now more difficult to achieve since the technology is approaching a limit. These time trends, of increasing theoretical energy requirements and improvements in the efficiency of using fuels are shown schematically in Figs. 2(a) and 2(b). The actual quantity of fuel required per ton of metal at any time is the theoretical requirement divided by the efficiency of fuel utilisation. The variation deduced from Figs. 2(a) and 2(b) is shown in Fig. 2(c). This indicates that although fuel inputs to mining may have declined historically this is no guarantee that they will not rise, perhaps very rapidly, in the future. The point at which the fuel requirements start to rise very quickly is when the technological efficiency approaches its theoretical limit and when the average grade of ore declines at a relatively fast rate. Thus, according to this analysis the point at which material prices start to increase ought to be determinable by examining trends in technical efficiency and ore grades. Energy analysis should also be able to identify which production costs will rise most since this should depend on relative energy intensity. There is some evidence to support this view of the long-term fuel requirements for material production. Figure 3 shows the fuel use per unit output of all U.S. mines [30]. It is not yet clear how much the increase in fuel requirements leads to an increase in costs, nor have there been enough energy analyses of different materials to indicate which will rise fastest or when rises are likely. (d) Evaluation of conservation schemes The main role of energy analysis in the evaluation of measures designed to conserve energy is that it considers the entire production system and incorporates both indirect and direct fuel consumption. A review of copper smelting furnaces [48] recommended an electric furnace on the grounds that it had a thermal efficiency of 61 per cent compared to oil or gas fired furnaces with efficiencies of about 27 per cent. When the efficiency of generating electricity is included in the energy analyses of the two furnaces then the electric furnace has a significantly lower performance in terms of primary energy consumption [10]. A more complex situation arises in considering the use of industrially gener27
Chapman--Energy Analysis (a)
o,-6
Qa
~8
oa ~ J~ I--
tO
20
30
40
50
Time ma
"6 Q~
"G UJ
6
t
[
i0
20
- ~.~[c)
! 30
I
I
40
50
Ti m e
5 = o 4
t
I
I
t
I
r
IO
20
30
40
50
Time
Fit3.2. (a) The increasing theoretical energy requirement per ton of metal as the grade o f ore worked decreases with time. (b) The change in technical efficiency of utilising fuels over the same time period. (c) The quantity or fuel required per ton o f metal deduced from (a) and (b). ated scrap for producing new material. A steel company might conclude that the more steel it produces from scrap rather than pig iron, then the smaller will be its energy consumption per ton of steel output. This might encourage the steel company to install scrap-handling furnaces and increase the price paid for scrap. Let us assume that at the same time a car-manufacturer chooses to install a steel press which has a smaller direct fuel consumption but produces more scrap steel than an alternative press. The car manufacturer does not suffer a serious financial penalty since the price of steel scrap has been increased by the steel company. Indeed, the car-manufacturer will perceive his investment as a way of reducing costs by 'conserving energy'. However, the net effect of these two decisions is to significantly increase the fuel consumed per motor car produced. This is obvious when the system studied includes both the steel-works and car manufacture plant, as shown in 28
Omega, Vol. 4, No. 1
o.
15
0
I0 ° ~ o ~ o h
I
i
1
I
I
18EIO
1900
1920
1940
t960
FIG. 3. The fuel required per unit output o f all U.S. mines.
Fig. 4. If all the scrap steel used by the steel company comes from the car manufacturer then the larger the flow of scrap the larger will be the energy required per motor car. From Fig. 4 the quantity of pig iron per motor car is unaffected by the scrap cycle, but the steel furnace fuel consumption will increase as the amount of scrap increases. This is an extreme example of how optimising part of a system for minimum direct fuel consumption could lead to an overall increase in fuel consumption. Paradoxically such situations are most likely to arise when fuel supplies are expensive and 'energy conservation' is fashionable. At a more general level energy analysis can also identify the areas where most significant fuel savings could be made. Also, by comparing the actual energy expended in a process with the theoretical minimum energy required, energy analysis can identify areas where expenditure on research may offer significant returns in terms of energy savings. It is already apparent that many processes
El/ton
Pig iron EJton
_ I Steel I furnace
1
Car ~ [l+/3')tons_ ~ manufacture steel
Car oufput " E.each
/3 tons scrap FIG. 4. The system including both steel-works and car-production plant shows that the energy required per car is given by Ec = Ep + E I (1 q- 8) where ~ is the fraction o f steel recycled and E t the quantity o f fuel per ton throughput for the furnace.
29
Chapman--Energy Analysis which are dominated by a change in enthalpy (e.g. chemical processes) or by work requirements (e.g. transport) are close to their thermodynamic limit whereas processes which are dominated by a change in entropy (e.g. mineral benification, uranium enrichment) are many orders of magnitude away from their theoretical minimum requirements.
(e) Energy policy Energy analysis can contribute to both the evaluation of energy resources, as explained above (b), and to the evaluation of energy demand. Until recently most estimates of future energy demand were based on the aggregate correlation between fuel use and GNP. Energy analysis relates fuel use to commodities in final demand and as such permits a disaggregated forecast which can allow for changes in the production and demand for different commodities [43]. A 3 per cent rise in G N P means that real production, and hence real purchasing power, is increased by 3 per cent. However, if the increase in production were due to an increase in demand for oil products (~2500 MJ/£) it would lead to an increase in primary fuel demand a hundred times greater than if the increase in production was in cigarette manufacture (,,,25 MJ/£). This emphasises the significance of patterns of production, and hence patterns of expenditure and lifestyles, on the relationship between G N P and fuel use. This technique of estimating future fuel demand could be extended to incorporate any foreseeable changes in technological efficiency, product design or resource depletion. In addition energy analysis enables investment decisions which involve increasing fuel consumption, such as house insulation [11], to be incorporated in the projections. Although energy analysis provides a way of evaluating policy options in detail it has only been used in a few instances [18, 20].
5. C O N C L U S I O N S Energy analysis is a new subject which may provide useful insights and data on the use of resources in an industrial system. To date most studies have been concerned with establishing basic data on the energy requirements of goods and services. This must continue to be the most important activity in the field since without reliable data there can be no application. The studies could be enlarged so as to compare processes, not just products, and evaluate both the marginal and the average energy requirements. A major flaw in most energy analyses reported to date is that they do not contain estimates of errors or reliability. This defect of presentation should be corrected at once. The reliability of the energy data and validity of analysis methods will only become clear when the same processes or technologies are evaluated by several different studies. 30
Omega, VoL 4, No. 1 Any report of an energy analysis must contain a clear statement of the conventions and methods used in the study. To facilitate comparison with other workers the conventions should be based on the IFIAS guidelines [19], any departures from this or any additional assumptions should be clearly stated and related to the aims of the study. In this context it is always important to state the assumed energy content of primary inputs; the energy conversion efficiencies used and the size of the system being analysed. Without clear statements on all these points then the results of an analysis may be misinterpreted or applied in a fallacious way. Since energy analysis provides a way of looking at the overall performance of an industrial system its results will probably be more useful for the formulation or evaluation of government policy and planning than for business planning. In this respect energy analysis provides a very versatile way of estimating energy demand and can take account o f changes in technology and patterns of consumer expenditure. Energy analysis can provide good guidelines for a fuel pricing policy which will discourage the least efficient use of primary fuels. Energy analysis can also provide information which could improve financial cost estimates for business since it gives the price elasticities and some guidance on likely price trends. These are particularly significant for the most energy intensive industries, which are those concerned with the production of fuels and materials. At the moment all these applications must await the compilation of a reliable data base. In the longer term the methods of analysis could be extended to evaluate other resource requirements of production processes, particularly 'man-hours' and 'land'. Together these resource analyses provide a framework for the evaluation of technical changes and for refining estimates of future financial costs.
ACKNOWLEDGEMENTS The author is grateful to members of the Energy Research Group, particularly Professor M Hussey, for many useful discussions and comments on this paper.
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A~.), 10, 11. 4. BERRY R S and MAKINO H (1974) Energy thriftin packaging and marketing. Technology Rev. 76, 33. 5. BERRY R S and LONG T V (1975) A n international comparison of polymers and their alternatives.Energy Policy 3, (in press). o ~ G . 4/1---e
31
Chapman~Energy Analysis 6. B~o~soN MJ and V L ~ DA (1975) Price propagation in an I/O model: determining the implication of higher energy costs for industrial processes. Proc. Conf. Understanding Energy Systems (session C), London, April 1975 (also to be NEDO publication). 7. Ba.Av^p.o JC, FLORA HB and PORTAL (1972) Energy expenditures associated with the production and recycle of metals. Rpt. No. ORNL-NSF-EP-24 (Oak Ridge Nat. Lab., Tenn.). 8. BrF~r~sKICL, I~t~SSEFH and BRAUCHEF (1971) Availability of Uranium at VariousPrices from Resources in the U.S.U.S. Bureau of Mines. Circ. 8501. U.S. Govt. Printing Office. 9. Building editorial staff(1975) Monthly cost information file. Building 3 10. CnAI'MANPF (1974) Energy costs--a review of methods. Energy Policy 2(2), 91. 11. CrtA.rMANPF (1975) Conventions, methods and implications of energy analysis. In Proc. Conf. Understanding Energy Systems, London, April 1975. 12. (a) Cm~A,'q PF (1974) The ins and outs of nuclear power. N. Sci. 64, 866. (b) CHAPMANPF and MORTIMERND (1974) Energy inputs and outputs of nuclear power stations. Open University Research Rpt. ERG 005.' 13. C ~ M x r a PF (1974) Energy costs of producing copper and aluminium from primary sources. Met. Mater. 8(2), 107. 14. CHAPMANPF (1974) Energy conservation and recycling of copper and aluminium. Metals Mater. 8(6), 311. 15. CrtAPMArqPF, LEACHG and SLESSERM. (1974) The energy cost of fuels. Energy Policy 2(3), 231. 16. Ct-~PMANPF (1975) The energy cost of materials. Energy Policy 3(1), 47. 17. CHAPMANPF and MORTt~,IERND (1975) Energy analysis of the Census of Production 1968. Open University Research Rpt. ERG 006 18. Crt~MAN PF (1975) A Fuel's Paradise-Energy Optionsfor Britain. Penguin Books, London. 19. Energy Analysis (1974) Workshop Rpt. No. 6. IFIAS (Nobel House, Sturegatan 14) Stockholm. 20. Exploring Energy Choices (1974) Publ. Energy Policy Project (Ford Foundation). 21. FOLK H and H^tqNoN B (1974) An energy pollution and employment policy model. In Energy. (Ed. MACRAKISMS), p. 159. MIT Press, Cambridge, Mass. 22. HANNOr4B (1974) Options for energy conservation. Technology Reo. 76, 25. 23. HASNONB (1972) Bottles cans and energy. Environment 14(2), 11. 24. HE~NDEENRA (1974) Use of input-output analysis to determine the energy cost of goods and services. In Energy. (Ed. MACRArdSMS), p. 141. MIT Press, Cambridge, Mass. 25. HiLL KM and WALFOitDFJ (1975) Nuclear aspects of energy accounting. In Proc. Conf. Understanding Energy Systems, London, April, 1975. 26. HmST E (1972) Energy consumption for transportation in the U.S. ORNL-NSF-EP-15 (Oak Ridge Nat. Lab. Rpt.). 27. HI~T E and MOVERSJC (1973) Efficiency of energy use in the U.S. Science, N.Y. 179 (4080), 1229. 28. K~NWAROM (1975) How to cook the energy accounts. N. Sci. 66(946), 205. 29. LrAcrt G (1973) The energy costs of food production. In The Man-Fond Equation. (Ed. Boum~E A). Academic Press, London. 30. LOVERINGTS (1969) Mineral resources from the land. In Resources and Man. Freeman, London. 31. MAKHI.IAN1AB and LICHTENBERGAJ (1972) Energy and well-being. Environment 14(5) I0. 32. Mineral Facts and Problems (1970) U.S. Bur. Mines Circ. 650, U.S. Govt. Printing Office. 33. MoR'r!~R ND (1974) Gross energy requirements of marine transport. Open University Research Rpt. ERG 007. 34. MORTIMERND (1975) Gross energy requirements of air transport. Open University Research Rpt. ERG 008. 35. MOVERS J (1972) Room air conditioners as energy consumers. Rpt. ORNL-NSF-EP-59 (Oak Ridge Nat. Lab. Tenn.). 36. N.E.D.O. (1974) Energy Conservation in the U.K. HMSO, London. 37. N.E.D.O. (1974) The Increased Cost of Energy--Implications for U.K. Industry. HMSO, London. 32
Omega, Vol. 4, No. 1 38. Nxtsso~ S (1974) Energy analysis--a more sensitive instrument for determining costs of goods and services. Ambio 3(6), 222. 39. Pt~,-CrEL D et al (1973) Food production and the energy crisis. Science, N.Y. 182, 443 (see also Science, N. Y. 184, 135, 307). 40. I~ICEJ (1974) Dynamic Energy Analysis of Nuclear Power. Earth Resources Ltd. London. 41. ROBERTSF (1974) Energy consumption in the production of materials. Metals Mater. 8(4), 205. 42. ROBERTSP (1973) Models of the future. Omega5(5), 592. 43. ROBERTSP and OtrrRAM VE (1974) A Method of Projecting Energy Demand in the U.K. Dept. Environment, London. 44. (1975) Shale oils high risk future. Bus. Wk, April 28, 87. 45. SMrrH H (1969) Cumulative energy requirements of some products of the chemical industry. Transactions (Wld. Pwr. Conf.) 18. 46. SLF.SSERM (1975) Accounting for energy. Nature, Lond. 254, 170. 47. SLr.SSERM (1973) Energy subsidy as a criterion in food policy planning. J. Sci. Fd Agric. 24, 1193. 48. Ta.tELH^RDDG (1973) Copper state of the art. Chem. Engng (special review April issue). 49. WFdGHTDJ (1975) Primary resource requirements of commodities AppL Econ. 7(1), 31. 50. WazGn'r DJ (1974) Calculating energy requirements of commodities from the I/O table. Energy Policy 2(4), 307.
ADDRESS FOR CORRESPONDENCE:Dr.P Chapman, Director, Energy Research, The Open University, Walton Hall, Milton Keynes, MK7 6AA
33
Energy Analysis" A Review of Methods and Applications PETER CHAPMAN (Received June 1975; in revised form September 1975)
The paper describes the aims and applications of energy analysis, emphasising its role as a complement to conventional financial analysis. It is shown to provide useful insights in applications such as forecasting price rises due to a fuel price rise, calculating the net costs of fuel obtained from unconventional sources, forecasting energy demand and evaluating energy conservation schemes. Although the field is still young, and most activity is in compiling reliable data bases, its systems approach and methods promise to make it a useful tool for evaluating patterns of resource uses.
1. I N T R O D U C T I O N E N E R G Y analysis is a systematic way o f tracing the flows o f energy t h r o u g h an industrial system so as to apportion a fraction o f the primary energy input to the system to each o f the goods and services which are outputs o f the system. The result o f an energy analysis is a set o f 'gross energy requirements' (get) for all the commodities produced. W h e n applied to a national economic system then the quantities o f all the commodities produced, each multiplied by its respective gross energy requirement, will add up to the primary fuel input to the system. Thus, an analysis which concludes that the get o f a loaf o f bread is 20 M J ' implies that the production o f a loaf o f bread required the removal o f 20 MJ of primary energy f r o m some energy resource stock. Some would be used in extracting the fuel and converting it to a form suitable for use, some would be used in transporting commodities between various stages o f production, some would be used in producing materials and equipment used in the processes and some would be used as a direct process input, such as the fuel for ovens. Energy studies were given a large impetus by the oil price rise in 1973 so that although the methods o f energy analysis were used prior to 1973 most studies have been carried out in the last 2 years. The very rapid development o f the subject has given rise to misunderstandings as to its aims and range o f application. The purpose o f this paper is to clarify the aims and applications o f energy analysis. To accomplish this it is necessary to discuss the methods o f analysis and the conventions used (Section 2); to relate energy analysis to financial Note that 1 MJ = 0.28 kWh = 9-5 x 10 -3 therms = 950 Btu. 19
Chapman--Energy Analysis analysis (Section 3); and to discuss some of the applications of energy analysis (Section 4). This will make it clear that energy analysis is not an alternative to economic analysis but a way of refining certain parts of economic analyses. Energy analysis can complement economic analyses since it can be directly related to the state of technology and its methodology involves examining the whole industrial system, not a single firm. These two aspects of energy analysis are illustrated in the examples given and used to give some information about future costs.
2. M E T H O D S There are three basic methods available for evaluating the gross-energyrequirements of goods and services, namely statistical analysis; input-output analysis and process analysis. These have been described in detail elsewhere [I0, II, 19] and their relative merits discussed. Briefly the problems and advantages of these methods are Statistical analysis: Uses published statistics as data source. Able to compare technologies where suitably disaggregated statistics exist. Not usually possible to find comprehensive statistics on all inputs to processes except for census data. Published statistics may contain significant errors, especially due to double counting [2]. Input-output analysis: Based on published economic input-output tables. Degree of aggregation fixed by the table, cannot compare different processes for same commodity. Errors due to preferential prices and statistical adjustments needed to balance table. Advantage--that it takes into account all indirect effects. This method gives the ratio of the total energy input to the financial value of the output, referred to as the energy intensity, for an industry or commodity group [24, 49, 50]. Process analysis: Based on detailed evaluation of process inputs often in cooperation with producer. The only technique for comparing processes and technologies in detail. Problems in deciding where to draw system boundary [10, 19]. Needs data from one of above methods to determine ger of minor inputs (otherwise one process analysis leads to analysis of all production). In August 1974 an international workshop considered the methods and conventions of energy analysis and agreed a basic set of ground rules which are common to all the above methods [19, 38, 46]. However, these conventions are necessarily incomplete and any particular study must add its own conventions, based on the aims of the particular investigation. The most important factors which have to be chosen are those relating to (a) the definition and energy content of primary fuel inputs: should solar energy be counted? should uranium be counted on its theoretical energy content ? (b) the definition of the system analysed: in particular this requires specification of the ger of imports. 20
Omega, VoL 4, No. 1
(c) the partitioning of energy used in co-production processes or common services: this is particularly important if the problem posed involves changing the quantity of output for just one of the co-products. The fact that different investigations, seeking answers to different questions, may use different conventions in the above respects means that care is necessary in interpreting the results o f energy analyses. The conventions used in an analysis are not arbitrary but must be chosen to suit the definition of the problem under investigation [I0]. For example in evaluating the ger of a loaf of bread some convention is needed to establish the get of imported wheat. If the study has the aim o f evaluating the fraction of U.K. primary fuel used in the production of bread then the only energy requirement is for transport of the imported wheat from dock to bakery. However, if the study were evaluating the total energy sequestered from the world stock o f energy resources for the production of bread then the imported wheat should be given a ger which reflected the energy expended in its production and transport from the exporting country. Clearly these studies will result in different numbers for the ger of a loaf of bread. There is no sense in which one number is more 'correct' than the other, but the subsequent application of either result would have to be consistent with the convention used in its evaluation. A similar problem of interpretation has arisen as a consequence of energy analyses of nuclear power stations. At least one author has seen the confusion and misinterpretation of results as sufficient grounds for questioning the validity of energy analysis [28]. However, it is clear that an investigation which asks "how much fossil fuel energy is required to build a nuclear reactor ?" will produce a different answer to one which asks "how much fossil fuel will we save by substituting a nuclear power station for a coal-fired station" since the latter question presumes a substitution not considered in the former. Provided these differences are taken into account then all the analyses of nuclear power are consistent. Recently Hill and Walford [25, 28] have attempted to divide energy analyses according to the aims of the investigation. This has led them to suggest that there are six methods of energy analysis. This classification, which confuses methods and aims, is not helpful since in practice most analyses subscribe to more than one aim and use most, if not all, of the methods distinguished by Hill. A significant feature of most energy analyses carried out to date is that they are mostly concerned with evaluating the average ger of a good or service. However, this may be inappropriate when the energy analysis results are to be used in comparing alternative policies which involve change. For example the average ger of passenger transport by road and rail incorporate the present loadfactors of both systems and suitably amortised fractions of the ger of capital items such as roads and rolling stock. A small s h i f t of passengers from one transport mode to another might not incur a n y change in capital and may 21
Chapman--Energy Analysis simply change the load-factors of both systems. Under these conditions the change in energy consumption would be more accurately calculated using marginal energy requirements, not average energy requirements. If policies were contemplated which involved a massive shift of passengers from one mode of transport to the other, then it is likely that the most significant factor in energy use would be the energy required for the immediate capital investment [11, 12]. Thus for policy applications the present practice of evaluating average ger is not appropriate. This is an area where the methods of analysis and presentation of results could be significantly improved. 3. R E L A T I O N
TO
FINANCIAL
ANALYSIS
A conventional financial analysis considers costs in terms of factor payments. In addition to payments to labour and capital there will also be payments for items purchased from other suppliers. A new aluminium smelter would include payments for electricity, bauxite, carbon anodes, etc. This procedure takes no special note of how the suppliers of these items arrive at their costs (or prices) so it is impossible to determine how sensitive the total cost estimate is to commodity prices. For example, increasing the price of oil or the average wage rate would affect all the items listed above, but each to a different degree. In the conventional analysis the system studied is the firm and the exchanges across the system boundary are described in terms of the prices of the commodities exchanged. The justification for this lies, ultimately, in the belief in the 'perfect market' theory of price determination. The perfect market theory assumes that all producers and consumers have perfect knowledge of the present and future availability and production costs of all commodities. Were this the case then the conventional analysis, based on prices, would give all the information required for an investment or policy decision. However, this is not the case. Knowledge of the present is not freely available and knowledge of the future does not exist, so present prices cannot give information on the future availability or production costs of commodities. 2 Clearly any future changes in the availability or costs of production will eventually be experienced as price changes, but the point is to try to anticipate these changes. There are many factors, such as cartel formation, union action, government taxes and subsidies, which will affect future prices which cannot be anticipated by any method of analysis. However, there are also technological features of availability and production costs which are amenable to analysis. This can be illustrated by considering an alternative way of estimating the total financial cost which involves choosing a set of basic commodities and evaluating the total quantity purchased including direct and indirect inputs. z Some analysts have argued in a circle by trying to deduce information about the future from present prices. Clearly if the market were perfect, a necessary condition for prices to contain future information, then everyone would have perfect information about the future without recourse to analysis ! 22
Omega, Vol. 4, No. 1 If the quantity of commodity i is Q, per unit output and its price P~ then the total cost estimate, per unit output, C, is C = L'PI Qii
(1)
This type of commodity analysis can be applied to any number of basic commodities, although care is necessary to avoid double counting. 3 Energy analysis is a type of commodity analysis since it sets out to evaluate the total quantity of one commodity, fuel, used in the production process. Energy analysis can be related to financial analysis by considering the subdivision of all the factor inputs to a production process, as shown in Fig. 1. Ultimately all the factor inputs result in a 'personal income'. However, for the purpose of this
Labour Labour
Profits and interest
E 0 t~ c
Land 0 L~
e3
Lobour
Plant, machines
Land
Materials L Fuel
[",.. Profits and interests
Transport
Lot)our F""--. Materials
Capital Fuel
[ [
"'C ".. Fuel
Fuel
FIG. 1. The division and subdivision of factor payments into 'payments to personal income" and 'payments for fuel'.
analysis payments to the fuel industries are held separate and represented by a quantity of energy times a price of energy.4 Thus, in terms of an energy analysis framework the total cost per unit of output, C, is given by 3 Evaluation of commodity inputs can be accomplished using I/O tables, see Ref. 49. The problem is that I/O tables are usually too aggregated to be useful. The justification for not dividing fuel payments into personal incomes is that a large fraction of fuel payments is to an external cartel. Furthermore, the price of other fuels will rise towards the cost of this monopolistically controlled fuel price since there is a large degree of substitution possible between fuels.
23
Chapman--Energy Analysis C----p, E q - ~ P j J where E
(2)
price per unit energy ---- energy per unit output (i.e. ger of output) personal incomes for labour, finance, land, etc. =
This immediately enables the effect on costs of a change in the price of energy to be calculated as zlC = ,4p,.E.
(3)
This method of predicting the effect of fuel price rises can be extended to incorporate different rises for different fuels (e.g. Ref. 6). As explained below, energy analysis may also have a role to play in estimating the future price of fuels relative to other commodities.
4. APPLICATIONS OF ENERGY ANALYSIS There are probably as many reasons for performing energy analyses as workers in the field. However most of the published studies fall under one of the following general headings: 1. 2. 3. 4. 5. 6. 7.
evaluation of energy policy, energy sources, etc. [12, 15, 21, 25, 40, 42, 43]; effects of fuel price rises [6, 37]; evaluation of conservation measures [14, 22, 27, 36]; energy use in agriculture [29, 39,47]; energy and material resources [2, 7, 13, 16, 31, 41]; energy use in transport [2, 26, 33, 34]; energy and product design, technical change etc. [1, 3, 4, 5, 23, 35, 49].
Most of these studies are concerned with the evaluation of energy requirements or energy intensities. Whilst most studies relate their findings to policy issues, only a few have any direct application. This is a reflection of the youth of the subject and the fact that a considerable data base is necessary before direct applications can arise. The most constraining factor in energy analysis at the moment is the availability of reliable data and it is in this area where most activity currently takes place. In principle, once collected this data should lead to a number of important applications. At the moment these can only be illustrated by incomplete studies, but they do show how the subject could develop into a useful policy tool. (a) Effect offuel price rises The division of commodity inputs into payments to 'personal incomes' and to the fuel industries, as shown in Fig. I, allows the effect of fuel price rises to be 24
Omega, VoL 4, No. I calculated according to one of two assumptions. Either 'personal incomes' (excluding those derived from employment in the fuel industries) maintain their real purchasing power, in which case all prices rise in proportion to fuel prices, or it can be assumed that personal money incomes remain constant, in which case the price rise can be calculated using equation (3). In practice neither assumption holds, there is some loss of purchasing power, but not in direct proportion to the fuel price rise. However, for the more energy intensive industries the calculations based on equation (3) do give a good indication of which prices are likely to increase the most. Table 1 shows the range of price TABLE 1. COMPARISON OF CALCULATED AND OBSERVED PRICE RISES FOR BUILDING MATERIALS O b s e r v e d rise
Timber Sand Bricks Paint Mild steel Cement Plaster P.V.C.
Calculated rise (%)
(Dec. 73--Dec. 74) (V.)
6-7 7-25 11-16 18-28 19-25 35-37 13-15 30--40
0 20 26 33 34 36 42 50
rises calculated using different estimates of energy requirements [6, 17] and the actual price rises observed from December 1973 to December 1974 [9] for a number of building materials. Except for 'plaster' the ranking of the calculated price rises agrees with the observed rises, s For less energy intensive products there is significantly less correlation between calculated and observed price rises. (b) Oil shales Energy analysis may have a special role to play in refining the financial analyses of future energy sources. This is perhaps best illustrated by the recent reports [44] of escalating costs of oil shale production. " I n the past each time the price of oil went up, shale oil companies promptly declared that their time had finally come . . . . Now companies which once said shale oil would be profitable at $5.0, then $7.50, then $11.0 a bbl are hard pressed to name any figure at all." According to equation (2) the costs of producing a barrel of oil from oil shales can be written as C = p, E + P (4) n Note that the lower than predicted price rise for timber could be accounted for by the very large increase in timber prices prior to December 1973 due to the increase in demand. 25
Chapman--Energy Analysis
where P represents the sum of all personal income payments. If we accept an estimate of C = $6/bbl when OPEC oil was $2.5/bbl, and the present estimate that C = $12/bbl when OPEC oil is $10/bbl, then we can estimate E by assuming a rate of inflation for P, the personal income payments. Assuming that the price of energy (p,) is tied to the price of OPEC oil and that in the period considered the personal income payments inflate by 20 per cent then we have 6 = 2"5E-bP
12 = 10E-q- 1-2P giving E = 0-69 bbls oil input/bbl oil output. Thus the price escalation could be explained by a very high energy input needed per unit energy output. The above calculation should not be considered as a way of calculating E since the final result is very sensitive to the cost estimates (which until recently were probably not much more than guesses) and the inflation factor assumed for personal incomes. The most reliable way of estimating E is by performing a detailed energy analysis of the process. Given an accurate estimate of E then the price of oil at which oil shales are economic is given by P p, $/bbl. (5) (I--E) This assumes that all the energy inputs are at the prevailing oil price. Essentially the energy analysis of energy resources points to a feedback between inputs and outputs which could be overlooked in a financial analysis. Although a financial analysis could accommodate the feedback due to the direct consumption of fuel it could not take into account all the indirect fuel consumption without resorting to an energy analysis procedure. It should be noted that equation (5) shows that the relative prices of energy derived from different sources depends upon two factors, the payments to 'personal incomes' P, and the net energy yield, (1--E). It is possible that some of the previously uneconomic energy sources now being considered as substitutes for OPEC oil could be even more expensive than anticipated due to the 'net energy' term. For example it has been estimated that uranium could be recovered from Chatanooga Shales at $70/lb U308 [8] compared to present uranium prices of $10/Ib U3Os. Energy analyses of the production processes involved [12] shows the Chatanooga shale to be significantly more energy intensive than present mining with the result that the recent oil price rise only increases the price of $10/lb uranium by 5 per cent but the $70/lb uranium rises by 30 per cent. 6 The energy requirement for uranium from Chatanooga shales published in Ref. 12 is incorrect. Correction to the water and sulphuric acid inputs give an energy requirement of 7.11 x 106 kWht/ton U3Oe. 26
Omega, Iiol. 4, No. 1 (c) Long-term price trends of materials The theoretical minimum of energy required to mine enough ore to produce a ton of metal is inversely proportional to the ore grade. The theoretical minimum of energy is required to remove the ore from the ground and to crush the ore prior to separating the mineral particles from the dirt. Over the past 70 years the average grade of copper ores worked has declined from about 2-5 ~ Cu to less than 1 ~ Cu, with the U.S.A. currently exploiting ores containing less than 0 . 5 ~ Cu [30, 32]. Thus, over this period the theoretical energy required to mine 1 ton of copper has increased. Over the same period there have been technical improvements in the efficiency of using fuels to perform the transport and crush ores. However, these technical improvements, particularly in the design of engines, electricity generators and crushing machines, are now more difficult to achieve since the technology is approaching a limit. These time trends, of increasing theoretical energy requirements and improvements in the efficiency of using fuels are shown schematically in Figs. 2(a) and 2(b). The actual quantity of fuel required per ton of metal at any time is the theoretical requirement divided by the efficiency of fuel utilisation. The variation deduced from Figs. 2(a) and 2(b) is shown in Fig. 2(c). This indicates that although fuel inputs to mining may have declined historically this is no guarantee that they will not rise, perhaps very rapidly, in the future. The point at which the fuel requirements start to rise very quickly is when the technological efficiency approaches its theoretical limit and when the average grade of ore declines at a relatively fast rate. Thus, according to this analysis the point at which material prices start to increase ought to be determinable by examining trends in technical efficiency and ore grades. Energy analysis should also be able to identify which production costs will rise most since this should depend on relative energy intensity. There is some evidence to support this view of the long-term fuel requirements for material production. Figure 3 shows the fuel use per unit output of all U.S. mines [30]. It is not yet clear how much the increase in fuel requirements leads to an increase in costs, nor have there been enough energy analyses of different materials to indicate which will rise fastest or when rises are likely. (d) Evaluation of conservation schemes The main role of energy analysis in the evaluation of measures designed to conserve energy is that it considers the entire production system and incorporates both indirect and direct fuel consumption. A review of copper smelting furnaces [48] recommended an electric furnace on the grounds that it had a thermal efficiency of 61 per cent compared to oil or gas fired furnaces with efficiencies of about 27 per cent. When the efficiency of generating electricity is included in the energy analyses of the two furnaces then the electric furnace has a significantly lower performance in terms of primary energy consumption [10]. A more complex situation arises in considering the use of industrially gener27
Chapman--Energy Analysis (a)
o,-6
Qa
~8
oa ~ J~ I--
tO
20
30
40
50
Time ma
"6 Q~
"G UJ
6
t
[
i0
20
- ~.~[c)
! 30
I
I
40
50
Ti m e
5 = o 4
t
I
I
t
I
r
IO
20
30
40
50
Time
Fit3.2. (a) The increasing theoretical energy requirement per ton of metal as the grade o f ore worked decreases with time. (b) The change in technical efficiency of utilising fuels over the same time period. (c) The quantity or fuel required per ton o f metal deduced from (a) and (b). ated scrap for producing new material. A steel company might conclude that the more steel it produces from scrap rather than pig iron, then the smaller will be its energy consumption per ton of steel output. This might encourage the steel company to install scrap-handling furnaces and increase the price paid for scrap. Let us assume that at the same time a car-manufacturer chooses to install a steel press which has a smaller direct fuel consumption but produces more scrap steel than an alternative press. The car manufacturer does not suffer a serious financial penalty since the price of steel scrap has been increased by the steel company. Indeed, the car-manufacturer will perceive his investment as a way of reducing costs by 'conserving energy'. However, the net effect of these two decisions is to significantly increase the fuel consumed per motor car produced. This is obvious when the system studied includes both the steel-works and car manufacture plant, as shown in 28
Omega, Vol. 4, No. 1
o.
15
0
I0 ° ~ o ~ o h
I
i
1
I
I
18EIO
1900
1920
1940
t960
FIG. 3. The fuel required per unit output o f all U.S. mines.
Fig. 4. If all the scrap steel used by the steel company comes from the car manufacturer then the larger the flow of scrap the larger will be the energy required per motor car. From Fig. 4 the quantity of pig iron per motor car is unaffected by the scrap cycle, but the steel furnace fuel consumption will increase as the amount of scrap increases. This is an extreme example of how optimising part of a system for minimum direct fuel consumption could lead to an overall increase in fuel consumption. Paradoxically such situations are most likely to arise when fuel supplies are expensive and 'energy conservation' is fashionable. At a more general level energy analysis can also identify the areas where most significant fuel savings could be made. Also, by comparing the actual energy expended in a process with the theoretical minimum energy required, energy analysis can identify areas where expenditure on research may offer significant returns in terms of energy savings. It is already apparent that many processes
El/ton
Pig iron EJton
_ I Steel I furnace
1
Car ~ [l+/3')tons_ ~ manufacture steel
Car oufput " E.each
/3 tons scrap FIG. 4. The system including both steel-works and car-production plant shows that the energy required per car is given by Ec = Ep + E I (1 q- 8) where ~ is the fraction o f steel recycled and E t the quantity o f fuel per ton throughput for the furnace.
29
Chapman--Energy Analysis which are dominated by a change in enthalpy (e.g. chemical processes) or by work requirements (e.g. transport) are close to their thermodynamic limit whereas processes which are dominated by a change in entropy (e.g. mineral benification, uranium enrichment) are many orders of magnitude away from their theoretical minimum requirements.
(e) Energy policy Energy analysis can contribute to both the evaluation of energy resources, as explained above (b), and to the evaluation of energy demand. Until recently most estimates of future energy demand were based on the aggregate correlation between fuel use and GNP. Energy analysis relates fuel use to commodities in final demand and as such permits a disaggregated forecast which can allow for changes in the production and demand for different commodities [43]. A 3 per cent rise in G N P means that real production, and hence real purchasing power, is increased by 3 per cent. However, if the increase in production were due to an increase in demand for oil products (~2500 MJ/£) it would lead to an increase in primary fuel demand a hundred times greater than if the increase in production was in cigarette manufacture (,,,25 MJ/£). This emphasises the significance of patterns of production, and hence patterns of expenditure and lifestyles, on the relationship between G N P and fuel use. This technique of estimating future fuel demand could be extended to incorporate any foreseeable changes in technological efficiency, product design or resource depletion. In addition energy analysis enables investment decisions which involve increasing fuel consumption, such as house insulation [11], to be incorporated in the projections. Although energy analysis provides a way of evaluating policy options in detail it has only been used in a few instances [18, 20].
5. C O N C L U S I O N S Energy analysis is a new subject which may provide useful insights and data on the use of resources in an industrial system. To date most studies have been concerned with establishing basic data on the energy requirements of goods and services. This must continue to be the most important activity in the field since without reliable data there can be no application. The studies could be enlarged so as to compare processes, not just products, and evaluate both the marginal and the average energy requirements. A major flaw in most energy analyses reported to date is that they do not contain estimates of errors or reliability. This defect of presentation should be corrected at once. The reliability of the energy data and validity of analysis methods will only become clear when the same processes or technologies are evaluated by several different studies. 30
Omega, VoL 4, No. 1 Any report of an energy analysis must contain a clear statement of the conventions and methods used in the study. To facilitate comparison with other workers the conventions should be based on the IFIAS guidelines [19], any departures from this or any additional assumptions should be clearly stated and related to the aims of the study. In this context it is always important to state the assumed energy content of primary inputs; the energy conversion efficiencies used and the size of the system being analysed. Without clear statements on all these points then the results of an analysis may be misinterpreted or applied in a fallacious way. Since energy analysis provides a way of looking at the overall performance of an industrial system its results will probably be more useful for the formulation or evaluation of government policy and planning than for business planning. In this respect energy analysis provides a very versatile way of estimating energy demand and can take account o f changes in technology and patterns of consumer expenditure. Energy analysis can provide good guidelines for a fuel pricing policy which will discourage the least efficient use of primary fuels. Energy analysis can also provide information which could improve financial cost estimates for business since it gives the price elasticities and some guidance on likely price trends. These are particularly significant for the most energy intensive industries, which are those concerned with the production of fuels and materials. At the moment all these applications must await the compilation of a reliable data base. In the longer term the methods of analysis could be extended to evaluate other resource requirements of production processes, particularly 'man-hours' and 'land'. Together these resource analyses provide a framework for the evaluation of technical changes and for refining estimates of future financial costs.
ACKNOWLEDGEMENTS The author is grateful to members of the Energy Research Group, particularly Professor M Hussey, for many useful discussions and comments on this paper.
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ADDRESS FOR CORRESPONDENCE:Dr.P Chapman, Director, Energy Research, The Open University, Walton Hall, Milton Keynes, MK7 6AA
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