What Is Energy Return on Investment (EROI)?
Let me explain Energy Return on Investment (EROI) directly to you—it's a ratio that describes the energy produced compared to the energy used to create it. For example, this ratio shows how much energy goes into locating, extracting, delivering, and refining crude oil versus the usable energy that results from it.
You need to know that EROI is a key factor in energy pricing because sources you can tap cheaply keep prices low.
Key Takeaways
EROI represents the energy expended to produce a specific amount of net energy. It plays a major role in pricing energy commodities and electricity. EROI drops when energy gets scarcer and harder to extract or produce.
Understanding Energy Return on Investment
EROI matters because if an energy plant costs more to run than the revenue from selling electricity, it's not viable economically. It also lets organizations and governments compare sources like nuclear and solar for profitability.
When EROI is high, producing energy from that source is straightforward and cost-effective. But if it's low, getting energy from there is tough and expensive. For instance, a ratio of 1 means no net return on the energy invested. The World Nuclear Association says the break-even point is 7.
In its basic form, you calculate EROI as Energy Output divided by Energy Input. However, measuring inputs varies widely, and there's debate on how far back to go in the process. Inputs are diverse, and you must consider external costs like environmental and health impacts.
Typically, the highest EROI sources get used first since they provide the most energy with the least effort. Achieving a net energy gain means spending less energy to acquire and use a source. EROI analysis fits into life-cycle analysis.
Types of Energy Sources Where EROI Is Measured
EROI gets measured for various consumable energy sources to analyze efficiency and costs, including oil, biofuels, geothermal energy, nuclear fuels, coal, solar, wind, and hydroelectric.
The average EROI for all generating technologies in the United States is around 40, according to the World Nuclear Association. Their cited study by Weissback et al. (2013) shows nuclear, hydro, coal, and natural gas systems are far more effective than photovoltaics and wind power.
The U.S. Energy Information Administration notes that fossil fuels like coal, petroleum, and natural gas have dominated energy since the late 1800s. Until the 1990s, hydropower and solid biomass were the top renewables. Since then, biofuels, solar, and wind have grown.
For oil, EROI has decreased dramatically over the past century. The energy required to produce one barrel of oil has decreased with efficient methods like fracking.
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