eROeI — energy accounting 101

Energy return on energy invested (eROeI)is a simple idea that explains why we won’t be driving around on synthetic fuels ever. It’s the reason our energy paradigm has to change.

Synthetic liquid fuels consume a lot of energy in production leaving much less available for other uses.

In business there’s a concept called return on investment (ROI), and it’s pretty simple. When ROI is a positive number you can make a profit, when it’s negative, you lose money.

If you invest $10, say in marketing, to sell a $1,000 product, your ROI on the marketing program is 100 fold, which is nice, thank you very much. But it’s never that simple of course — you can have a positive ROI on a marketing program and still lose money overall. All the costs of running a business, including raw materials, investments in plant and materials, people, energy, and other things go into a profit calculation and the ultimate results are very often much less.

We can and must do the same kind of accounting for energy, especially when trying to figure out what will propel our civilization later in this century. Generally, when harvesting or creating energy you want to have a large positive number for energy ROI better known by the term energy returned on energy invested(eROeI). Oil and gas wells, as well as coalmines, are great for eROeI and oil wells are often the best examples of getting large returns.