EROI to Help Policymakers Arrive at Best Energy Mix


Published Date : Feb 12, 2015

The advent of modern society can be traced back to almost a century and a half, when energy was first derived from coal to make steam and steel, escalating common men out of poverty into the dawn of modern lifestyle. With the discovery of oil as a potent energy resource, obtaining power became easier and more convenient. Energy outputs increased in manifolds with little inputs. 

EROI, the abbreviation for Energy Returned on Investment, was a concept coined during the time of power discovery that demonstrated the investment that was needed to exploit the newer sources of generating energy. Also known as the Energy Returned on Energy Investment (EROEI), it depicts the ratio of energy returned to what was invested. If the calculation reflected a larger value, it entailed that deriving energy from the source would be easier and cheaper. However, in case if the calculation depicted a smaller number the energy source will be both expensive and difficult to capitalize on. 

For instance, if the calculation resulted one, there would be no return on investment and it would mean that the entire investment that was made on energy has been wasted. According to research, the breakeven point for generating power to suffice the need of modern society is about seven. 

However, with the emergence of fossil fuels in the early 20th century in America, the return on investment registered was unfathomably impressive. It was recorded in 1930, that when 1 joule of energy was put to oil, it generated more than 100 joules of energy and EROI was recorded at 100. Similarly, coal as a source of energy propelled industrialization to a great extent around the world. When the same technology was used by power plants to calculate the rate of return it depicted impressive results. 

Experts say, EROI has its relevance even today and can help the policy makers plan their energy generation chart judiciously.