Introducing efficiency: the energy costs of energy supply and use

In an earlier series of posts (Fueling an industrial world and Energy and the biophysical view of economic activity: from joules to fuels) I pointed out how aggregating energy sources on the basis of their nominal heating values—as is common practice for our most prominent and influential energy information agencies at national and international scale—tends to obscure the dependencies between concrete economic infrastructure and the specific forms that energy sources take in practice. The aggregation process involves taking a highly abstract view of energy sources—a view that highlights only one narrow parameter, at the expense of most of what is important for appreciating how our physical economy functions. One of the most critical areas of omission relates to the energy costs of energy supply and use.While this is by no means the only important information that’s hidden (see the posts In praise of fossil fuels—Part 2: The remarkable legacy of ancient life, Energy density and the prospects for renewably powered societies and A rough guide to visualising energy density for other considerations), it does have particularly significant implications. The reason for this is readily appreciated via an analogy with financial accounting, where omission of these costs is equivalent to assessing a business entity’s performance only in terms of revenue while overlooking expenses. To understand the contribution that a particular business venture makes to a company’s bottom line, we need to know what it costs us to generate income. Assessing the net contribution that a particular source makes to overall “energy income” requires that we know something about how much energy is needed to make that source available to us. And when a company’s managers spend money in an effort to create saleable goods or services, justification for the investment will typically rest on the expectation of generating a sufficiently high rate of return—that is, the relationship between capital outlay and potential future revenue is a critical decision factor. When we use fuels and electricity to provide some beneficial effect, the manner in which we use them has implications for how much benefit we can derive. In other words, making allowance for costs on both the supply side and the use side is essential for understanding the overall utility—in terms of work, lighting and heating—that can be derived from a given energy source. None of this is taken into account when energy information agencies present data on primary supply and final consumption. This has consequences both for comparing the relative contributions of different sources, and for understanding their combined absolute scale in terms of the practical economic activity they can support.

This general issue of “cost neglect” provides the background to why it is that I’ll be dealing with such issues under the overarching theme of efficiency. To appreciate why the various threads that I’ll discuss in the upcoming series of posts converge under the banner of efficiency, we need to start by recognising that the broad concept is more general than what most of us typically understand by energy efficiency. A little while back, I described efficiency in terms of the value derived from the effort invested in, or inputs applied to, what we do. That is,efficiency relates the inputs to and outputs from some transformation process—it provides us with a key measure of performance for evaluating the functions carried out by a system. As such, it is yet another entailment of viewing a situation in which we’re interested in systems terms. In this respect, it’s noteworthy that in Soft Systems Methodology efficiency is one of three criteria—the others being efficacy and effectiveness—that Peter Checkland nominates as essential for comprehensively monitoring, assessing and controlling the performance of any system of human activity.[1] In the post after next I’ll look at how these three criteria can themselves be systemically related, and why considering them together opens up opportunities that can remain hidden when any are neglected. For now though, the principal point I wish to make is that we can usefully group under the broad umbrella concept of efficiency all situations where a systems view of performance, relating valuable inputs to valued outputs, is relevant.

One intention here is to develop a clearer appreciation for the various energy costs associated with energy supply and use. This is important in understanding the technical potential for reducing these costs—“reducing waste” in everyday parlance—but we’ll take this further, by also looking at the systemic consequences of cost reductions. In particular, we’ll look at why it is that such cost reductions—in isolation from their broader systemic context—are not necessarily the unqualified good that they appear on the surface to be. But the primary intention is to highlight the limits of technical improvement—and moreover, why it is that, at the macro-scale of whole economies, the energy costs of energy supply and use are subject to inevitably increasing upward pressure. While we’ve become accustomed to economy of scale effects in which the more we produce of some good or commodity, the less it costs us per unit, our principal energy sources are shaped by a different logic.Note 1 As we proceed, we’ll delve into the fundamental implications that this has for the future prospects of our present form of socio-cultural organisation—global industrial civilisation itself.

Aspects of energy efficiency: a rough mapping

To get us started, in Table 1 I’ve presented a map of the principal energy cost categories that have a bearing on these matters. This way of relating the various dimensions of energy efficiency is not necessarily definitive. It does, however, bring some higher order conceptual structure to the task, and so may be helpful for getting a clearer sense of what we’re dealing with. The map on its own is not intended to be self-explanatory—the commentary that follows should make clearer why it is that I find it useful to relate the different aspects of the overall landscape in this particular way.

Table 1: Aspects of energy efficiency—perspectives on the costs of energy supply and use

Table 1: Aspects of energy efficiency—perspectives on the costs of energy supply and use

The basic conceptual device I’m working with here is the tried-and-true two-by-two matrix: two pairs of categorical distinctions that when arranged as the dimensions of a matrix create four distinct domains. Again, I don’t want to imply that there’s anything particularly sacrosanct about this arrangement, it’s just a tool that I’ve found useful for organising and structuring my thinking in this area. The first distinction that I’m making is between an analytic view and a systemic view. For those who’ve been following for a while, this will be familiar, but in summary: the analytic view tends to focus on entities (whether they be parts of some more comprehensive whole, or wholes that can themselves be decomposed into parts) in isolation; the systemic view attempts to deal with entities as parts of more comprehensive wholes, and of whole systems in relation to their encompassing environments—here, we try to maintain connection with broader context. I’ll reiterate a point I’ve made before: neither of these views is “more correct”—but taking one or the other of them tends to highlight different features. A genuinely comprehensive approach to making sense of things will take both into account.

Before proceeding, I’d like to address a point of potential confusion here. A little earlier I said that assessing the efficiency of some process is an entailment of dealing with situations in which we’re interested in systems terms. And yet I’m now saying that we can take both analytic and systemic approaches to thinking about efficiency. The apparent contradiction here is dissolved in recognising that to deal with a situation in systems terms is not necessarily the same thing as dealing with it systemically. To view a situation in terms of transformation processes mediating inputs and outputs doesn’t automatically entail treating system and sub-systems or system and environment as mutually influencing and interacting wholes—the distinguishing feature of the systemic approach. The key to the systemic approach lies in maintaining ongoing sensitivity to the broader contexts in which the things we’re interested in are embedded—and therefore treating the “things” themselves as contingent constructions of us, the inquirers. There are no “real” systems in this view—just systems ideas for organising our thinking and learning. As such, one of the practices in the systemic approach is to try to hold very lightly the concepts with which we think.

The second distinction is between what I’m calling the engineering view and the economic view. While this distinction perhaps appears a little more prosaic than the first, at the systemic level this also tends to reflect a micro-scale versus macro-scale emphasis—the engineering view being focused on the facilities scale of “plant & equipment”, with the economic view tending to look at enterprises, industries or sectors. This is, once again, a rough sketch only though, and shouldn’t be pushed too far—there’s plenty of scope for exceptions.

I’ll give a brief run-down of the approaches covered in each of the four quadrants, to set the scene for extended discussion in subsequent posts.

1A: The analytic engineering view

This is the realm of energy efficiency as it is typically understood in everyday conversation—the ratio of a system’s useful energy-related output to the nominal energy input, in the form of, say, fuel or electricity. I’ll expand on the reason for highlighting what I’ve referred to in the table as irreversible processes shortly—the main point of this, though, is to distinguish between energy costs that must be born as a consequence of the desired output from some energy conversion process, and that tend to be large but with a finite limit on the extent to which they can be reduced; and “nuisance” energy costs associated with the differences between real and ideal physical processes, that tend to be small but can be minimised through appropriate design (although there are limits both ultimate and practical to this).

1B: The analytic economic view

This view deals with what is in essence a direct analogue of energy conversion efficiency, but expressed in terms of the economic value of outputs or products. Here, maximum energy output for a given input is not the measure of ideal performance per se, but rather maximum utility or exchange value of products. I’ll give only brief attention to this area in its own right—it will take on particular significance though when in due course we make a detailed inquiry into rebound effects under the systemic view.

2A: The systemic engineering view

Here we start to encounter considerations that bear directly on the problem of aggregating energy sources on the basis of nominal heating value. The key insight that arises with the systemic engineering view is that the maximum amount of work that a system can do (or for that matter, of heat that it can transfer) is not a function of the system’s properties in isolation—it depends on the relationship between the system and its environment. The energy that any system can transfer to its environment is maximised when the system and its environment are brought into equilibrium with one another. Environmental conditions therefore affect the system’s available energy—or simply, its availability: the maximum amount of useful work that it can do on the environment. While the concept of available energy is more than a century old, and has been in use as availability in engineering thermodynamics since the 1940s, more recently it has been “popularised” as exergy analysis—with exergy being the term given to a system’s available energy. The implications of this view will hopefully be clear: the availability associated with an energy source—the maximum work that it can do—is a function of the system of which the energy source is a part, not a fixed characteristic of the energy source in isolation. If we want to know about the capacity of an energy source to affect physical change, we need to know more than the source’s nominal heating value per unit of mass—we need to know the details of the energy conversion system with which the source will be used to affect such change, and we need to know about the relationship between the system and its environment. We see here, yet again, how energy is not some inherently existing entity contained in a fuel, but is instead a conceptual entailment of viewing physical change processes in systems terms. I’ll say more about “second law efficiency” when we look at this area in detail a few posts further on.

2B: The systemic economic view

Bringing a systemic approach to the engineering view of energy efficiency leads to thinking about the performance of plant and equipment in terms of what I’ve labelled broadly as thermodynamic availability—the maximum amount of work that an energy source can provide in a specific context, taking into account the overall situation in which the energy source is used. In very general terms, thermodynamic availability relates to what we can do with an energy source once it has been placed at the disposal of an end user. Omitted from this view are the processes—and associated energy costs—by which that energy source is made available to the end user in the first place. The production and supply of energy resources is a major area of economic activity—and hence energy use—in its own right. The business of providing energy inputs to the rest of the economy itself uses enormous quantities of energy. As a consequence, evaluating the quantity of energy available for non-energy supply related economic activity is not simply a matter of tallying up the nominal heating value of all sources—we need to correct for the energy costs of supply. The corrected quantity is, roughly speaking, the economic equivalent of thermodynamic availability—hence my characterisation of this, with reference to Table 1, as the domain of “economic availability”. Here, the appropriate performance measure for energy supply systems is not simply the gross energy quantity supplied, but the energy return on energy invested, or EROI. This determines the size of the energy supply system relative to the rest of an economy, and hence has profound implication for the nature of that broader economy in terms of the ways of life it can support. I’ve briefly introduced EROI considerations on several previous occasions, but it demands more focused attention and extended examination in its own right.

Taking a systemic approach to the economic view of energy efficiency also brings us into the critically important territory of rebound effects—the various ways in which improvements in energy efficiency (and hence resource productivity) at the micro-economic scale can lead to increased rather than reduced energy use at the macro-economic scale. Rebound effects tend to be poorly understood when they’re dealt with only from an analytic perspective, in which macro-economic behaviour is assumed to result from the simple aggregation of all micro-economic activity i.e. adding together activity at the enterprise scale, without allowing for emergent effects. A systemic perspective is necessary to adequately account for the relationships between behaviour at micro- and macro-scales. This is a major area of inquiry towards which the efficiency theme will carry us.

Just a note on terminology at this point: as mentioned when I first alluded to the distinction between engineering and economic views some way back, the aspects of energy efficiency grouped under the economic view should not be confused with the typical economist’s view—while resource productivity is a staple of conventional economic thinking, rebound effects are often marginalised or dismissed altogether (a matter that I’ll explore in more detail as we proceed); and in such circles, energy return on energy invested just seems to fly under the radar altogether.

In the next post, I’ll continue exploring the efficiency theme by looking in more detail at the analytic view.


Note 1 It’s worth noting at this point that the situation extends well beyond energy resources. In general, it’s a consequence of first “picking the low hanging fruit” in any enterprise. This is a subject that the inquiry will consider in more detail when we look at the relationship between energy use and social complexity further down the track.


[1] Checkland, Peter B. & Poulter, John. (2006). Learning for action: A short definitive account of Soft Systems Methodology, and its use for practitioners, teachers and students. London: John Wiley & Sons, p. 173.

2 thoughts on “Introducing efficiency: the energy costs of energy supply and use

  1. Pingback: The engineering view of systemic efficiency: available energy | Beyond this Brief Anomaly

  2. Pingback: The economic view of systemic efficiency: energy return on energy investment | Beyond this Brief Anomaly

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