Some Basic Concepts ENERGY INSTITUTE Econ 3385 – Economics of Energy www.uh.edu/energyinstitute UNIVERSITY of HOUSTON BAUER COLLEGE of BUSINESS ADMINISTRATION Econ 3385 – Economics of Energy S. Gürcan Gülen, Ph.D. ENERGY INSTITUTE

Measuring Energy We measure: Crude oil in barrels (bbl) or tons (t) Natural gas in cubic feet (cf) or cubic meters (cm) Coal in tons Electricity generation capacity in watts and generation & consumption in watthours And, energy in barrels (or tons) of oil equivalent, or British thermal units (Btus), or joules (J), or calories (cal)

Measuring Energy Some conversion factors 1 ton of oil = 7.33 barrels of oil 1 barrel = 42 gallons 1 gallon = 3.8 litres 1 cubic meter of gas = 35.3 cubic feet of gas = 0.00629 barrels of oil equivalent = 0.0009 tons of oil equivalent 1 terawatt = 1,000 gigawatts (= 1,000 megawatts (= 1,000 kilowatts))

Measuring Energy Common unit that measures the “heat content” is Btu: The quantity of energy needed to raise the temperature of one pound of water by one degree Fahrenheit. 1 Btu = 1,055 Joules = 0.252 kilocalories 1 Joule = 0.00024 kilocalories Therm = 1,000,000 Btus Quad = 1015 Btus

Measuring Energy Some examples Sources for further information 1 barrel of oil  5.8 million Btus 1 cubic foot of gas  1,030 Btus 1 short ton of coal  14.6 – 26.8 million Btus 1 kWh of fossil-fuel generation  10,300 Btus 1 kWh of consumption  3,412 Btus Sources for further information www.eia.doe.gov (Annual Energy Review) www.bp.com/worldenergy/calculator/main.htm

Measuring Energy 1 cubic meter of gas = 35.3 cubic feet of gas = 0.00629 barrels of oil equivalent = 0.0009 tons of oil equivalent 1 cubic meter of gas = 35.3 x 1,030 Btus = 36,359 Btus 36,359/5,800,000 = 0.00627 (boe) 0.00627/7.33 = 0.0009 (toe)

Energy Efficiency THERMAL Oil 4 Coal 13 Gas 4 Nuclear 6 Electricity Combustion Heat and/or mechanical energy Generator system Nuclear 6 Electricity Hydro 8 Other Output: 11 mboe/d or 6,825 TWh/yr Photovoltaic Fuel Cell Input: 35 mboe/d

Energy Efficiency Output equivalency: Efficiency 11 mboe x 5.8 mBtus x 365 = 23,287 x 1012 1 TWh = 109 kWh = 3,412 x 109 Btus 23,287 x 1012 / 3,412 x 109 = 6,825 TWh Efficiency Input: 35 mboe x 5.8 mBtus = 203 x 1012 Output: 11 mboe x 5.8 mBtus = 63.8 x 1012 Efficiency: 63.8 x 1012 / 203 x 1012 = 31.4%

Energy Efficiency Heat rate: 3,412 Btus / efficiency rate 3,412 / .314 = 10,866 If you know cost of fuel and heat rate, you can calculate fuel cost per kWh If coal is $30/t (or, $30 per 20 mBtus), a plant with the above heat rate will generate 1 kWh at 0.016 $/kWh or 1.6 ¢/kWh: (Heat rate/Btu content of 1t of coal) x Price of coal = (10,866/20,000,000) x 30 = 0.016

Energy Efficiency 10,866 is very high and represent old technology; new combined-cycle gas plants have a heat rate of about 6,000. 3,412/6,000 = .57 or 57% efficiency Last year, natural gas was $2.5 per 1,000 cf: (6,000/1,030,000) x 2.5 = 0.015 $/kWh This winter, natural gas was $10 per 1,000 cf: 0.06 $/kWh Note, however, that fuel cost is only part of generating electricity! (www.eia.doe.gov/oiaf/kyoto/tbl16.html)