Energy Return on Investment (EROI)
Candlefocus EditorEROI is an important metric for both energy producers and customers. It is a useful measure to have when determining the cost of energy and has serious implications across the energy industry. Energy sources with a higher EROI will generate a greater net energy gain, making them the most cost effective choice. Lower EROI sources may be more expensive to produce, but the quality of the energy source could outweigh this cost.
One example of EROI in practice is the extraction of oil and gas. EROI is used to calculate the energy produced and the energy consumed in the extraction process. The EROI also takes into account the energy used for drilling and transport. Similarly, the EROI of a solar panel is calculated to take into account the energy used for manufacture, transport and installation of the panel as well as the energy generated by it.
The EROI of different energy sources varies widely. Generally, fossil fuels have a higher EROI than renewable sources. Hydropower and bioenergy have traditionally had higher EROI than their renewable counterparts, but these are decreasing as sources of energy become scarcer and extraction efforts become more difficult and expensive.
In conclusion, EROI is an important economic indicator that helps energy producers and users to weigh the costs and benefits of different energy sources. As energy becomes increasingly scarce, its EROI both decreases and becomes increasingly important in determining the cost and affordability of different types of energy. It is therefore important to consider the EROI of different energy sources when assessing their value and the cost of energy extraction and production.