Economies and organisations always run on available energy, and energy is fundamental to any kind of economy/organisation. This is true whether you are hunting and gathering to obtain the food to enable people to have the energy to gather more food and socialise, or whether you are trying to run a world-spanning army through electric and oil power. The amount of energy that is available to the organisation after deducting the amount of energy expended to gain that energy, fundamentally influences the possibilities of what it, and its members, can do for ‘good’ or ‘bad’. Financial cost is one way of measuring this, but it should probably not be taken as the only or fundamental way of evaluating the relationship between energy expended and energy gained.
The ratio between energy expended and the energy available, as a result of that expenditure, is usually known as “Energy Return on Investment” (EROI) or as I prefer “Energy Return on Energy Input” (EREI)- because this makes it clear that energy input is central and money, while important, is secondary. The higher the EREI the higher the “energy availability” and the more freedom of action; although, for any particular group of people, this also depends on social organisation. In economies of high inequality, large groups of people are likely to be powerless and poor with little energy available to them.
Time is also a factor that is important. It might be necessary to expend more energy than is released in the hope of building a better energy system. It may also be the case that an energy system is so destructive in its side effects that it needs to be modified quickly. However, in the long term energy output must be greater than energy input for any kind of survival.
A fundamental reason why we have both our current prosperity and troubles, is because fossil fuels have been a massive gift. Their EREI has been very high. Some people suggest that it took the energy from one barrel of oil to produce 50 barrels of oil (figures vary but are large, I’ve seen figures of 1 to 100). We have had similar EREI’s for coal. Fossil Fuels are also easy to transport with relatively little energy loss – or in the case of gas, where there has been massive loss of escaped gas, the quantities of non-leaked gas have been so great and the loss so invisible, that it has not been counted until recently. Fossil fuels are also easy to use; the technology involved in their application is pretty straightforward and simple.
However, these huge ratios are no longer the case; EREI is declining for fossil fuels. Easy to access sources seem to have been used up, are close to having been used up or are taking more energy to extract energy. Companies are having to drill deep in the ocean, which takes lots of energy, with high potential for accident and loss. Other companies are moving into small, difficult or energy intensive processes such as tar sands, shale oil and fracking. These sources of fossil fuels would not be being used, if higher EREI sources were easily available. Coal appears to be still relatively low in energy consumption because miners now largely do open cut mining, which uses explosives, or straightforward drilling in to a cliff face. In other words coal seems to be good provided you ignore the ecological costs.
However, more people are starting to realise that fossil fuel pollution is not good for human and environmental health, coal in particular. Mines are often destructive of fertile lands needed for food production. Even more destructive mines which not only threaten food supplies, but threaten water or endangered wildlife are being opened or proposed. Finally, burning fossil fuels produces disruptive climate change, which is likely to consume even more energy in repairing, or abandoning, infrastructure damaged by that change. The more destructive, or potentially destructive, the mode of extraction allowed, the cheaper the financial cost, and probably the less energy deployed to obtain energy in the short term. There is an incentive for fossil fuel companies to be immediately destructive – which is not good on top of the destruction from climate change.
The energy needed to deal with, or remediate, such destruction and enforced change is quite high, and severely diminishes the available EREI, but the costs are usually put on the taxpayers (or ignored) rather than being charged to polluters, so the polluters notice it less.
With fossil fuels we have been spoilt. Energy became invisible, and rarely even features in most economics other than as price, despite its centrality. Likewise, we have not needed an economy of air, even if we all know that without air you are dead, and air might slowly accumulate poisons.
Declining availability of energy, may not mean that customer costs increase immediately; many energy companies have vast supplies of financial capital which they can use to maintain customer lock-in and prevent change, in the hope of recouping the loss over time, or in the hope of getting the last fossil fuels out of the ground before they become unsellable – either because people are sensible and abandon them, or because the system collapses in its own muck.
Given these factors of decline and destruction, it becomes vital for any organisation to think carefully about how they obtain the excess energy which enables them to act, and about the likelihood of the costs of cleaning up after destructive ways of obtaining energy.
Energy has to be the fundamental concern of any organisation whatsoever. Members of an organisation may always have to be thinking, ‘How can we get or generate more energy more efficiently, use it more efficiently, co-ordinate that use, and then expand what we can do with that amount of energy?’
Energy is even more fundamental than money, because without excess energy you cannot do anything. If the electricity to power the office buildings and computers is simply not available, nearly everything would shut down – no matter how much money you had.
Energy becomes a manageable problem if you use the right sorts of technology for the future, have the right kinds of organisation that can allocate energy where and when it is needed, and if the people in the organisation give the energy system the right kind of attention – the kind of attention that they would nowadays give to the monetary system.
Consequently, organisations probably need an Energy co-ordinator to make sure that different parts of the organisation co-ordinate energy uses, and that energy savings and efficiency are not diminished by another department making financial savings. Over time EREI, energy use and the effects of that usage are likely to become more pronounced in accounting and management measures.
An added aim for, say, local government involves questions about how they can increase the ability of their inhabitants to live well, which involves saving the conditions of life on the planet and local area (as they are not disconnected), providing adequate energy, guaranteeing low destructive energy supplies and using that energy well within the organisation and in local area.
To some extent renewable energy could provide an opportunity for organisations to become more self-sufficient, and less dependent on suppliers while saving money. ‘Distributed power systems’ also tend to be more resilient to shock events as they are not vulnerable to a central source collapsing or the transport wires collapsing. Taking such action may be inhibited by regulations which assume that the existing system is the only system possible.
If the EREI of fossil fuels is declining or increasingly produces dangerous effects, these energy sources need to be abandoned before they are used up, yet currently renewable, or low polluting, energies do not have as high EREI. Consequently organisations may need to restructure their energy expenditure, as part of their preparation for the future. It may be that for the short-term attempt to produce future energy savings, energy expenditure will be quite high, and this may also require financial expenditure.
At the moment, immediate financial savings are likely to disrupt energy savings, and possibly even make EREI invisible or low priority. What matters is what is counted, and the ease of counting money should not always make money the priority.
To reiterate yet again, the more energy availability, the more can be done for ‘good’ and ‘bad’. However, there are often organisational limits, what is often called ‘lock-in’; ways of doing things that become harmful after a certain threshold and are difficult to change.
For example, the more complicated an organisation can become, then in general the more it can do. All large multi-faceted organisations tend to become complicated. However, after a point the energy expended for the organisational energy released, can become unsustainable and declines. It takes more and more effort to maintain the physical and organisational structures. In many countries, we can see roads and bridges in bad repair. Maintaining complexity requires energy. Not using energy for the necessary repair and maintenance to keep the organisation going is a political decision deferring costs to the future. To save organisations from this fate, organisational limits may need to be investigated and recognised.
Money can resemble the excess of the energy system because an organisation can give itself temporary energy boosts by going massively into debt. This was the secret of apparent prosperity in the 80s; anyone can look prosperous if they burn up the future, but eventually the debt runs out or is called in. There has been an argument amongst financial analysts that fracking, for example, is only successful because of growing debt in the industry, based largely on future promises (imaginings) of high prices for the product and improved technologies of extraction.
However, if you constrain money too much then you cannot do anything because advancement requires financial investment. Ultimately, you can have a pile of money but if you do not have energy, you cannot actually use that money to do anything. Money may be based upon energy circulation and energy availability – if so, it can act as a form of stored energy (for a while).
Again with no energy availability, money is worthless. Energy production and its relation to Energy input is fundamental.