Energy return on investment (EROI)
Energy return on investment (EROI) is the ratio of the energy delivered by a process to the energy used directly and indirectly in that process (see Figure 1). EROI is defined as:
Energy here is defined as the physical ability to do useful work, where useful work is done when a body is moved by a force. The physical ability to do work is represented by the enthalpy of the fuel, so the numerator and denominator typically is measured in heat units such as Btus, joules, etc. The convention of measuring and aggregating energy by its heat content is discussed in detail below.
A common related concept is the energy payback period (see Figure 2). Every energy system has initial investments of energy in the construction of facilities. The facility then produced an energy out for a number of years until it reaches the end of its effective lifetime. Along the way. Along the way, additional energy costs are incurred in the operation and maintenance of the facility, including any self use of energy. An example of the latter is the natural gas produced by a gas well that is then used to pump more gas out of the ground, or the electricity from a power plant that is used to run the computers and lights in the plant. The energy payback period is the time it takes a facility "pay back" or produce an amount of energy equivalent to that invested in its start-up.
How "Physical" a Measure is EROI?
The EROI is a physical measure of scarcity in the sense that it is defined in physical units, i.e. Btus. However, it is not a "pure" physical measure because it is not independent of economic, political, and institutional influences. A "pure" physical index, if such a thing exists, would be a function of only physical phenomenon. For example, the laws of thermodynamics instruct us that there is a minimum, irreducible quantity of energy required to lift a barrel of oil to the surface. Given the distance to the surface and the mass of a barrel of oil, the theoretical minimum energy cost of producing that barrel could be calculated. In reality, of course, the actual energy cost of production is greater than that theoretical minimum due to a variety of physical and non-physical factors. It is impossible to precisely identify and quantify all those factors, or to unequivocally categorize them as either physical or economic factors. Certainly a significant determinant of actual energy costs are physical factors. For example, a critical determinant of the quantity of energy required to lift a barrel is its depth of burial (Funk and Anderson, 1985).
Other physical factors influencing per barrel energy costs are type of formation, porosity, permeability, and water:oil ratios. However, non-physical factors also influence energy costs. For example, the price of oil, both absolute and relative to other fuels, influence the amount of effort devoted to oil development production and would therefore affect the energy required to perform those tasks. Environmental regulations such as those requiring subsurface disposal of harmful chemicals used in oil production affect energy costs. Political decisions such as those governing drilling in the Arctic National Wildlife Range and offshore California affect energy costs.
Thus, it is apparent that the energy costs of petroleum development and production are in part physical manifestations of economic, political, and institutional factors, and in part manifestations of changes in the quality of the resource base itself. To the degree that it is influenced by non-physical factors, the EROI is not a "pure" physical measure. Sorting out the physical factors from the non-physical ones is difficult, if not impossible. At one level, the decision to drill in the Arctic National Wildlife Range is politically driven, but at another level physical factors such as depletion of high quality, low cost deposits in Oklahoma and Texas prompted the need to even consider drilling in the Wildlife Range.
Is the effect on energy costs of that decision to drill physically or non-physically driven? U.S. Environmental Protection Agency regulations governing disposal of chemicals used in enhanced recovery operations are political and technological decisions, but declining reservoir pressure and permeability first create the need for enhanced recovery techniques to be employed. Is the energy cost of waste disposal physically or non-physically driven? It should also be noted that the same line of reasoning could be applied to economic measures such as prices which are too often assumed to be driven by purely "market forces." Clearly there is a physical component to many market forces.
The Importance of Energy Surplus
Because the production of goods and services is a work process, economies with access to higher EROI fuel sources have greater potential for economic expansion and/or diversification. The history of the expansion of human civilization and its material standard of living is directly linked to, but not caused by, successive access to and development of fuel sources with increasingly greater EROI. The transitions from animate energy sources such as plant biomass, and draft animals, to wind and water power, to fossil fuels and electricity enabled increases in per capita output due to increases in the quantity of fuel available to produce non-energy goods. The transition to higher EROI fuels also enabled social and economic diversification as increasingly less available energy was used in the energy securing process, meaning more fuel was available to support non-extractive activities. Much of inter- and intra-society conflicts can in fact be traced to struggles for control over the disposition of energy surplus.
- Cleveland, Cutler J., Robert Costanza, Charles A.S. Hall, and Robert Kaufmann, 1984. Energy and the U.S. Economy: A Biophysical Perspective. Science 225: 890-897.
- Cleveland, Cutler J. , 1992. Energy Surplus and Energy Quality in the Extraction of Fossil Fuels in the U.S. Ecological Economics, 6: 139-162.
- Cleveland, Cutler J. Net energy from oil and gas extraction in the United States, 1954-1997. Energy, 30: 769-782.
- Gever, J., Kaufmann, R., Skole, D. and Vorosmarty, C., 1986. Beyond Oil: The Threat to Food and Fuel in the Coming Decades. Ballinger, Cambridge, 304 pp.
- Hall, Charles, Cutler J. Cleveland, and Robert Kaufmann, 1986. Energy and Resource Quality. (Wiley-Interscience, New York).