According to many, downturns in the U.S. and European markets are primarily the result of unsustainable behaviors in the financial industry. But, some critics are asking - was declining energy quality a major contributor to these negative turns? According to Dr. Carey King, a research associate at the Jackson School of Geosciences at The University of Texas at Austin, the answer to this question is likely “yes.” And, he is not alone is his opinion – critics including Professors Robert Ayres and Charles Hall, as well as former chief economist at CIBC World Markets Jeff Rubin have also voiced their belief that energy quality was (and will continue to be) a main driver in our economic strength (or weakness).

Dr. King’s research focuses on a metric called Energy Return on Energy Invested (EROI). In his work, he strives to define what EROI includes and what it means – with the hope of allowing us to compare the efficiency of the different energy sources that we currently, or might soon, rely upon to power our lives. In Dr. King’s publication in Environmental Research Letters, he discusses EROI in terms of another interesting dimension, called the Energy Intensity Ratio (EIR), which brings economics into the mix.

Energy Return on Energy Invested (EROI)

The concept of Energy Return on Energy Invested (EROI) describes the fact that, in order to get energy, we (generally) have to use energy. The EROI is a measurement of how much energy we use to get the energy we want.

For example: The gasoline that we use to power our vehicles (usually via a spark-ignition engine) is first pumped out of the ground as crude oil. This oil is then transported to refineries and then processed into gasoline (as well as diesel and a bunch of other refined petroleum products). This gasoline is then piped and trucked to gas stations, and then pumped into our cars. At every step, we use energy to get our gasoline a step closer to what we ultimately want – gasoline in our tank that can be used to take us where we want to go.

Calculating the energy return on energy invested (EROI) for the process above shows us that we get more energy out of our gasoline than we put into the system to get it to our cars. This is one of the reasons that we like traditional gasoline – lots of power out for little amounts of energy in. It is also one of the arguments against corn-based ethanol, which requires a lot of energy in for arguably less energy out.

Energy Intensity Ratio (EIR)

The Energy Intensity Ratio (EIR) is the energy intensity of an energy resource, divided by the economic energy intensity (energy per unit of GDP) of a country. A low economic energy intensity means that a high amount of economic value can be realized for a very small amount of energy.

In his letter, Dr. King points out that the worst recessions over the past 65 years have followed significant declines in energy quality (measured by the EIR for each fuel). He indicates that energy quality (measured by EIR) might be a contributing factor in the current recession – another argument for maintaining cheap, abundant energy sources to ensure economic growth. Dr. King argues that ”If we aren’t fundamentally changing the way we produce or consume energy now, don’t expect the economy to grow as much as the past two decades.”

Check out the figure below, created by Dr. King, which plots EIR vs. time. Cases of economic recession are indicated by the solid gray stripes.

As written by Dr. King:

“The results [of my research] indicate that EIR is an easily calculated and effective proxy for EROI for US oil, gas, coal, and electricity. The EIR correlates well with previous EROI calculations, but adds additional information on energy resource quality within the supply chain. Furthermore, the EIR and EROI of oil and gas as well as coal were all in decline for two time periods within the last 40 years, and both time periods preceded economic recessions.”

Reference: C. W. King. Energy intensity ratios as net energy measures of United States energy production and expenditures. Environmental Research Letters, 2010; 5 (4): 044006 DOI: 10.1088/1748-9326/5/4/044006

[Note: I first wrote about Dr. King’s research last year in two posts on my personal blog, Global Energy Matters.]