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

2. 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)

3. 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 = barrels of oil equivalent = tons of oil equivalent
1 terawatt = 1,000 gigawatts (= 1,000 megawatts (= 1,000 kilowatts))

4. 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 = kilocalories
1 Joule = kilocalories
Therm = 1,000,000 Btus
Quad = 1015 Btus

5. 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
(Annual Energy Review)

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

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

8. 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%

9. 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 $/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

10. 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 = $/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! (