Grkan Kumbarolu

Assoc. Professor of Industrial Engineering

Energy Policy and Planning
IE 461



Lecture Notes II-1.


Part II. Energy & Environmental Policy Modeling






Contents

1. Intiouuction ........................................................................................................................... 3
2. Eneigy Payback ..................................................................................................................... 4
3. Eneigy Efficiency ................................................................................................................... 8
4. Technological Learning ........................................................................................................ 12

1. Introduction


Primary energy is undergoing various transformations until it reaches the final consumer in the
form of useful energy as illustrated in Figure II.1 below.




Figure II.1. Energy Flow Diagram from Primary to Useful Energy
(http://www.thegreenhomeadvantage.com/Portals/0/LLNL_Energy_Chart300_1156px_transparent.png)

Primary energy refers to energy sources as found in their natural state. Secondary energy is
the result of the transformation of primary sources. Final energy is the energy supplied to the
final consumer for all energy uses. The final energy is available to the consumer to be converted
into useful energy. Electricity becomes for instance light, mechanical energy or heat when
converted into useful energy by the consumer according to her respective use.

An energy producing system is composed of many components whose production, transport
and installation requires the input of energy. Such a holistic view is embedded in a life cycle
energy assessment as shown in Figure II.2.


4










Figure II.2. Life Cycle Energy Assessment


The ratio between the energy input requirement and the energy output over an energy systems
lifetime is defines the energy payback as explained in the following.

2. EnergyPayback

For any given energy system, the Energy Payback Ratio (EPR) is the ratio of total final energy
produced during a systems normal lifespan to the energy required to manufacture, install,
maintain and fuel the system. Accordingly,

Extraction&
Processingof
RawMaterials
Manufacturing
ofSystem
Components
Packaging&
Transportation
Installation
Use&
Maintenance
Decomissioning
and/or
Recycling
Energy Input
Energy
Output
5

EPR =
E
,t
output
n
t=1
E
],t
nput
t<0
+ E
],t
nput
n
t=1 ] ]


(2.1)

where E
,t
output
, is the final energy output of type i (i=electricity, heat etc.) that is produced at
time t. Hence, all the energy poduced over the full lifetime n of the system is summed up in the
nominator. The denominator on the other hand includes the energy input required by the system
over its full lifetime. E
],t
nput
is the energy required by activity j (j= the systems construction,
operation, decommissioning etc.) for setting up (t0) and running (t1) the system. It should be
noted that the energy needed to produce, process and transport a fuel is considered under E
]
nput

as the energy required to fuel the system, but not the energy content (heating value) of the fuel
itself. Naturally, a high EPR indicates good performance in terms of the lifetime energy
production. A low EPR on the other hand implies that a significant amount of energy is required
to build and maintain the system. This is also an indication of poor environmental performance
since, if fossil fuels are used to supply that energy, higher energy requirements will lead to
higher pollutant emissions. At the lower extreme is an EPR close to 1 implying that the system
consumes nearly as much energy as it generates over its lifetime.


Exercise 2.1.

The energy input required for the production of a 1 MW wind turbine are given below. This
includes the energy associated with extraction, processing, transportation and assembly of
materials. The energy needs associated with the O&M phase of the turbine are estimated to be
300 kWh/year. The energy required for disposing the turbine amounts to 30 MWh.



Material Used


Energy Required
(MWh)
Steel 650
Aluminium 20
Copper 15
Sand 3
Glass 4
Polyester and epoxy 35
Reinforced Iron (foundation) 180
Conrete (foundation) 350
Miscelaneuous 10

Total energy required for one wind turbine


1,267 MWh


6

Consider a wind farm that consists of 15 wind turbines with 1 MW installed capacity each. The
annual electricity production from the farm is projected to be 39,420 MWh. The economic
lifetime is 20 years. Assuming that all energy inputs of the wind farm (including O&M and
disposal) are additive from the individual turbines input needs, compute the Energy Payback
Ratio of the wind farm.

Solution:

EPR =
S9,42u 2u
1,267 1S + u.S 1S 2u + Su 1S
= 4u.S




Energy Payback Time (EPT) is the length of time (in years) that a system needs to produce the
amount of energy that is required to manufacture, install, maintain and fuel the system. That is,


EPI = min _p_
E
],t
nput
t<0
+ E
],t
nput p
t=1 ] ]
E
,t
output p
t=1

1_

(2.2)


As opposed to EPR, a low EPT indicates good performance.


Exercise 2.2.

Consider a solar PV system with 10 kW installed capacity, consisting of five solar panels. The
total energy required for a solar panel (including raw materials, manufacturing, transportation
and installation) is 578 kWh as detailed below. The rest of the 10 kW-PV system requires 75
kWh of energy in total up to the point of installation, and 50 kWh/year is required for operation
& maintenance. The solar PV system will produce 162 kWh of electricity per year. What is the
Energy Payback Time of this system ?



Activity


Energy Required
(kWh)
Production of metallurgical grade silicon 2
Production of electronic grade silicon 7
Production of ingot 15
Cell Fabrication 81
7

Balance of System 473

Total energy required for one solar panel


578 kWh


Solution:

EPI = min _p_
S78 + 7S + Su
p
t=1
162
p
t=1
_


The result can easily be identified by comparing the cumulative energy requirement and
production year by year. That is,

End of Year,
t
Energy Input,
Cumulative
Enery Output,
Cumulative
0 653 0
1 703 162
2 753 324
3 803 486
4 853 648
5 903 810
6 953 972

Obviously, cumulative energy output exceeds the cumulative energy input at the end of year 6.
Assuming that energy requirements and production occur uniformly throughout the year, the
exact EPT can be computed by linear interpolation as

972-810
953-810
=
1
x
x=0.9 EPT =6.9 years

















8

3. EnergyEfficiency

In an energy using/producing process, system or machinery, the ratio of all useful energy output
to all energy input defines the energy conversion efficiency
energy conversion
, i.e.
p
cncg concson
=
E

output

E
]
nput
]

(3.1)

Typically, is a dimensionless number between 0 and 1, but generally expressed as a
percentage). The efficiency of Combined Heat and Power (CHP) generation plants, for example,
is about 70-80%. Conventional heat & power generation, on the other hand, has a much lower
energy efficiency as the heat obtained as a by-product during electricity generation is wasted.
Figure 3.1 provides an illustration of the energy efficiency in conventional and CHP systems. In
this example of a typical CHP system, to produce 75 units of electricity & heat, the conventional
generation or separate heat and power systems use 154 units of energy (98 for electricity
production and 56 to produce heat) resulting in an overall efficiency of 48.7 %. However, for
producing the same 75 units of electricity & heat, the CHP system needs only 100 units of
energy input. Accordingly, the overall energy conversion efficiency of the CHP system is 75%.


Figure 3.1. Energy Conversion Efficiency for Conventional and Combined Heat & Power
Generation
Source: http://www.epa.gov/chp/basic/methods.html

Energy efficiency can be described as the amount of a specified activity per unit of energy used.
In the above CHP system, for example, 1 unit of energy used produces 0.75 units of electricity &
68 Units Loss
11 Units
Loss
25 Units Loss
9

heat. Hence the overall energy conversion efficiency is 0.75, or 75%. In this example, activity is
the production of energy and it is measured in energy units. However, in a wider context, activity
could refer to the production of any good or service. In that case, the understanding of energy
efficiency in general (as opposed to the energy conversion efficiency, which is used for energy
conversion systems in particular) applies and is measured by the Specific Energy Consumption
as defined in the following..
The amount of energy required to produce a certain amount of good or service is called Specific
Energy Consumption SEC, i.e.
SEC
k
=
E
k
nput
P
k

(3.2)
where P
k
stands for the amount of activity (good or service) k produced, and E
k
nput
denotes the
total net energy input
1
that is required for its production. Reducing the amount of energy required
to provide the same product or service, that is reducing SEC
k
, is referred to as energy efficiency
improvement. Hence, SEC
k
can be considered as an indicator of energy efficiency. For the
computation of SEC, the amount of activity is measured in physical terms. Therefore, SEC is a
physical energy efficiency indicator. However, the production of goods or services can also be
measured in economic terms (based on the value of products). In that case, the Energy Intensity
EI is computed as
EI
k
=
E
k
nput
I
k

(3.3)
where V
k
is the value of good or service k produced. EI is an economic energy efficiency
indicator.
Physical production data is often not available and sectoral value added is published under
national statistics at a rather aggregate level where the output of different products and
subsectors is combined. Therefore, most aggregate level energy efficiency analyses are
inevitably based on the energy intensity.

Whatsoever, physical energy efficiency indicators should be preferred to economic ones as the
latter includes price information that may cause misleading energy efficiency conclusions. For
example, if the value of a product rises due to market-based reasons that are not related to the

1
Energy input can be based on the Lower Heating Value (LHV) or the Higher Heating Value (HHV) of fuels. HHV is a better
measure of the energy inefficiency of processes and is therefore a preferable basis for energy efficiency analysis. However, it
should be noted that most national and international energy statistics are based on LHV.

10

technology/process of production (e.g. change in the cost of raw materials, shortage of supply
etc.) then EI may decrease although the actual energy efficicency does not change.

Both EI and SEC are influenced by the structure of a sector, which can be defined by either mix
of products or mix of activities. Different energy efficiency conclusions may emerge depending
on which definition is used. The production of ammonia, for example, can be done by at least
two alternative processes:

i. Steam reforming, i.e. conversion of natural gas, LPG or petroleum naphtha into gaseous
hydrogen, and catalytically reacting the hydrogen with nitrogen.

ii. Partial oxidation of high viscosity, sulfur-rich crude oil residues

The former process, steam reforming, has a low SEC whereas the latter, partial oxidation of
residues, has a high SEC. If mix of products defines sector structure, than the higher SEC of
partial oxidation is considered to be a matter of energy efficiency. If, on the other hand, mix of
activities is used to define sector structure, than it is considered to be a matter of differences in
sector structure. It should be noted, however, that product mix is ae commonly used indicator of
sector structure.

The sector structure is an important factor for international comparisons of energy efficiency.
Similarly, structural indicators need to be considered for intercompany comparisons of energy
efficiency. Comparing the sectoral EIs or SECs of two different countries/plants at a given
structure provides information on relative energy efficiency (relative to the country/plant
compared) but not on actual energy efficiency (relative to what can be achieved). Therefore, the
EIs or SECs are compared with a reference value, which is based on the lowest energy
consumption that can be realized using the most energy efficient technology available. That is,


SEC
k
Rc]
=
E
k
nput MIN
P
k

(3.4)

and


EI
k
Rc]
=
E
k
nput MIN
I
k

(3.5)



The difference between the actual and reference EIs or SECs can be used as a measure of energy
efficiency. It indicates the energy efficiency improvement potential: what reduction in energy
input (per unit or value produced) can be achieved at a particular sector structure. This difference
11

can then be used for international or intercompany energy efficiency comparisons at different
sector structures.



Exercise 3.1.

Cement clinkers are formed by the heat processing of cement elements in a kiln, which is the
most energy intensive part of cement production. Therefore, the clinker content of cement is
considered to be a structural indicator in energy efficiency analysis. According to the type of
cement, the clinker content may vary significantly.

Assume that the Reference technology SEC of cement can be computed as a function of the
clinker content as

SEC
ccmcnt
Rc]
= 2 + 3r

where SEC is the specific energy consumption of cement, measured in GJ/t, and r denotes the
clinker to cement ratio.

Five plants have the following energy consumption, cement production and clinker to cement
ratio values:

Plant # Energy Use (GJ) Cement Production (t) Clinker to Cement Ratio
1 46,000 10,000 0.60
2 61,100 13,000 0.55
3 90,000 20,000 0.62
4 23,000 5,000 0.68
5 42,300 9000 0.58

Compare the energy efficiencies of these plants and rank them according to their energy
efficiency improvement potentials

Solution:

The actual SECs of the plants and reference SECs corresponding to the clinker to cement ratios
are computed as


Plant # Actual SEC (GJ/t) Clinker to Cement Ratio Reference SEC (GJ/t)
1 4.6 0.60 3.80
2 4.7 0.55 3.65
3 4.5 0.62 3.86
4 4.6 0.68 4.04
5 4.7 0.58 3.74


12

The energy efficiency improvement potentials SEC are then computed as the difference
between actual and reference SECs:

Plant # SEC (GJ/t)
1 0.80
2 1.05
3 0.64
4 0.56
5 0.96


The solution can also be depicted graphically.






4. TechnologicalLearning

Energy and environmental policy supports the deployment of new, more efficient and/or
renewable energy technologies. The diffusion of new technologies, however, is subject to cost
competitiveness. The technical performance of a technology increases and its production cost
decreases substantially as producers gain experience with the technology. Labor productivity
improves physically unchanged equipment due to improvements in work methods, plant layout,
material handling and organization of production. Empirical evidence indicates that the cost of
new technologies decays exponentially as a result of the learning effect. The most common form
of the relationship between cost and production level is given as
C
Cum
= C
0
Cum
b
(4.1)
where C
0
is the Cost of the first unit produced, and C
Cum
the cost per unit capacity at Cumulative
production capacity level Cum; b is an experience parameter. The percentage change in cost (C)
from cumulative production level Cum1 to Cum2 can be computed as


C =
C
Cum1
-C
Cum2
C
Cum1
= 1 -
C
Cum2
C
Cum1


(4.2)


The cost associated with the cumulative production levels are computed from equation (7.1) as

13


C
Cum1
= C
0
Cum1
b

(4.3)


C
Cum2
= C
0
Cum2
b

(4.4)



Substituting (7.3) and (7.4) into (7.2) yields

C = 1 - _
Cum2
Cum1
]
b

(4.5)



The ratio
Cum2
Cum1
represents the increase in cumulative capacity. Letting
Cum2
Cum1
= x , equation (4.5)
is rewritten as


C = 1 - x
b
= IR
(4.6)

C expresses the rate at which costs decline when cumulative capacity increases x times. This is
known as the Learning Rate LR. Its complement, 1-LR, is known as the Progress Ratio PR and
expresses obviously the remaining fraction of cost (per unit of capacity) after cumulative
production capacity increases x times. Hence,

PR = 1 - IR = x
b

(4.7)


It has become standard practice to refer to LR as the rate of cost decline for each doubling of
cumulative production capacity.

Figure 4.1 plots the learning curve for a doubling of cumulative capacity under various PR
assumptions. As can be observed from the figure, the cost reduction rate becomes less as
cumulative production capacity increases. It should also be noted that the learning curve is time-
independent.


14



Figure 4.1. The Learning Curve



Exercise 4.1.

The annual production capacity and cost (in real values) of solar PV modules for the period
2005-2011 in Europe is given below.


Year Production
Capacity
(GW)
Module Cost

(/W)
2005 0.6 5.83
2006 0.8 5.45
2007 1.1 5.30
2008 1.9 3.75
2009 2.0 3.40
2010 2.4 3.05
2011 3.5 2.84

Calculate the learning rate for each year

Solution:

First, the cumulative capacity is computed and then the experience index b from


0
2
4
6
8
10
12
100 200 400 800 1600 3200 6400
Cost
PR=80%
PR=85%
PR=90%
PR=95%
Cumulative
Capacity
15

b = ln _
C
Cum2
C
Cum1
] ln _
Cum2
Cum1
]


which is obtained by combining equations (4.2) and (4.5). The learning rate can then be
computed for each year by using formula (4.6). Results are as follows:


Year Production
Capacity
(GW)
Cumulative
Capacity
(GW)
b LR
2005 0.6 0.6 0,08 0,07
2006 0.8 1.4 0,05 0,03
2007 1.1 2.5 0,61 0,29
2008 1.9 4.4 0,26 0,09
2009 2.0 6.4 0,34 0,10
2010 2.4 8.8 0,21 0,07
2011 3.5 12.3