by Quite a while back we had a discussion of the idea of Energy Return On Energy Invested (EROEI) as a measure of the viability of solar and wind energy. I did the numbers for solar (including battery backup) and came to the conclusion that EROEI was at least 10 and therefore not a problem. The issue has come up in an email discussion I’ve been having. Thinking about it, I concluded that using a ratio of energy generated to energy invested is incorrect. As a starting point, I assume that we want to consider energy separately from market goods in general. Producing new energy requires inputs of both energy and market goods (including labour and capital). Think about this example Technology A uses 1 Mwh of energy input and 0 of market inputs to produce 10 MWh of energy
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Quite a while back we had a discussion of the idea of Energy Return On Energy Invested (EROEI) as a measure of the viability of solar and wind energy. I did the numbers for solar (including battery backup) and came to the conclusion that EROEI was at least 10 and therefore not a problem.
The issue has come up in an email discussion I’ve been having. Thinking about it, I concluded that using a ratio of energy generated to energy invested is incorrect. As a starting point, I assume that we want to consider energy separately from market goods in general. Producing new energy requires inputs of both energy and market goods (including labour and capital). Think about this example
Technology A uses 1 Mwh of energy input and $180 of market inputs to produce 10 MWh of energy output
Technology B uses 1 Mwh of energy input and $600 of market inputs to produce 20 MWh of energy output
Technology B has an EROEI of 20, while that for A is 10. But using technology B with 1 MWh of energy input, we produce 20 MWh yielding a net output of 19MWh, at a cost of more than $30/MWh. By contrast, using A, with 2.1 MWh of input, we can produce 21 MWh of output for net generation of 19 MWh at a cost of less than $20/MWh
How can we capture this. The calculation implied above is (EREOI – 1)/$ where $ is the cost of market inputs associated with a unit of energy input. In the absence of constraints on how much of each technology we can deploy, this gives us the lowest cost way of generating a given amount of additional net energy.
Where did the idea of using a ratio come from? I think it’s because ratios can be used to derive a payback period, which is commonly used in the evaluation of private investments. But the payback period is a kludge even in this case, and has no relevance when we are evaluating an energy strategy.
An EROEI criterion would make sense if we had a fixed amount of energy available as input to new energy generation and didn’t care about market costs. More generally EROEI would be relevant if we were seeking an energy transition so rapid that the construction of new generating sources was a major part of total energy use. But that isn’t the case. I don’t have data for the share of total energy use going into the manufacture and installation of solar and wind power. But that’s because this share is too small to be broken out from general industrial uses of energy,
I thank commenter MartinK for pointing out problems with the original version of this post, which used much lower EROEI numbers for both technologies.