Net Energy Analysis - what are we using?

Although it is now widely accepted that significant climate change is being caused by burning excessive amounts of carbon, the problem remains as to how to do something about it. Emissions trading will only work if it is applied universally - to all emitters in all countries - and at a rate that is significant in both timing and in its amount.

In the meantime, people, organisations and countries are taking action with their individual projects, programs and policies, hoping to make a difference and set an example.

But are they actually doing the right things? Although the common feature of their actions is that there is less carbon being burnt at or near their particular location, in many cases it seems as though the carbon-burning has just been displaced to somewhere else along the value chain or life cycle of the goods and services made and used.

So how can we tell if these actions are, in fact, useful?

The answer lies in the concept of Net Energy Analysis - NEA for short. NEA takes into account the energy implications of the whole life cycle and value chain of goods and services. Although it is an easy idea to grasp, it has proved to be very difficult to calculate.

To make matters worse, very little work has been done on NEA since the late 1970s, after the OPEC oil-shock of 1973 drove up energy prices and inflation. When energy prices and inflation decreased again in the early 1980s, so did interest in this subject. A quarter of a century later, we need to fire up a new generation of supercomputers and technical experts to follow the energy trail across the economy to work out where and how much energy is being spent when we do things or make things.

There have been three different approaches to NEA: Process Analysis (PA); Input-Output Analysis (IOA); and Average Energy Intensity (AEI).

PA looks at energy requirements of the main production processes and some important contributions from suppliers of inputs - for example the electricity to smelt aluminium in a crucible. It was recognised in early studies, that PA carries significant systematic errors due to the truncation of the system boundary.

IOA accounts for energy requirements originating from inputs from up-stream and side-stream supply chains, but requires powerful computers to calculate the large matrices of data - data that is often a best guess.

AEI, on the other hand, takes a very simple approach - it divides the gross energy expenditure by the gross national product (GNP) to get an overall national quotient of energy per dollar (MJ/$). AEI asserts that because money is essentially a measure of effort, the cost of any good or service is a close reflection of its energy implications. By “implications” it is meant that spending a dollar sets off a chain of energy expenditures, which is different from the idea of PA, which only looks at the “embodied” energy.

Although these three methodologies give widely differing results - up to a factor of ten within the PA and IOA - what is clear from all three kinds of analysis is that the basic conclusion of AEI holds - money spent is a close proxy for energy spent.

This conclusion is both intuitively obvious and hard to prove. Proof would require a thorough, ongoing, updated IOA to be done across the whole economy - in fact the global economy. It would have to take into account the whole value chain and the whole life cycle of each good and service. This is no small task and that effort will take time, money and scarce human resources. Do we need to put everything on hold until we have some definitive answers? Probably not.