Energy quality and energy surplus in the extraction of fossil fuels in the U.S.

Abstract

The goal of net energy analysis is to assess the amount of useful energy delivered by an energy system, net of the energy costs of delivery. The standard technique of aggregating energy inputs and outputs by their thermal equivalents diminishes the ability of energy analysis to achieve that goal because different types of energy have different abilities to do work per heat equivalent. This paper describes physical and economic methods of calculating energy quality, and incorporates economic estimates of quality in the analysis of the energy return on investment (EROI) for the extraction of coal and petroleum resources in the U.S. from 1954 to 1987. EROI is the ratio of energy delivered to energy used in the delivery process. The quality-adjusted EROI is used to answer the following questions: (1) are coal and petroleum resources becoming more scarce in the U.S.?, (2) is society's capability of doing useful economic work changing?, and (3) is society's allocation of energy between the extraction of coal and petroleum optimal? The results indicate that petroleum and coal became more scarce in the 1970s, although the degree of scarcity depends on the type of quality factor used. The quality-adjusted EROI shed light on the coal-petroleum paradox: when energy inputs and outputs are measured in thermal equivalents, coal extraction has a much larger EROI than petroleum. The adjustment for energy quality reduces substantially the difference between the two fuels. The results also suggest that when corrections are made for energy quality, society's allocation of energy between coal and petroleum extraction meets the efficiency criteria described by neoclassical and biophysical economists.