Energy Is the Lifeblood of Any Economic Unit

Posted on April 28th, 2011 by

Energy is the basic driver of all major economies. Nothing happens without an energy cost. That is virtually as basic as the laws of physics. Nothing is made, nothing is grown, nothing moves, without an energy cost. The lower the real cost of its energy, the more productive any economic unit will be. This holds true regardless of the size of the unit, whether it is a small company, or an entire nation.

The three value factors of energy include its cost in money per unit of energy, the cost of minimizing environmental damage, and the cost for transport from where it is to where it is used. These three factors affect the sum total cost of energy to any user in many ways. Since the cost of energy directly affects the value and profitability of any economic unit, it is important that every person, every organization, do what they can to lower overall energy costs. There are only two ways to do this, reduce energy consumption, and/or reduce energy costs.

Reducing energy consumption—conserving energy—is important only where energy efficiency can be increased, something that may not be practical in many cases. Also, this must be done without increasing environmental or transportation costs. While it is quite easy to assess direct costs, even that of transport, calculating the real cost of environmental damage is much more difficult.

An example of one very successful effort at a major change was that undertaken by the port of Long Beach and the Port of Los Angeles started in 2006. This change was undertaken principally to reduce air pollution, a major environment cost to the area. It had to be done in a manner that was as cost effective as practical. The following is a direct quote from the book Energy, Convenient Solutions.

California set forth a ballot initiative that would free up $5 billion for deployment of a million LNG vehicles on state roads. In 2006, the ports of Long Beach and Los Angeles adopted a plan to reduce drastically pollution from more than 16,800 Class-8 tractor trailers. The basis of the plan was promoting the massive conversion of diesel trucks to LNG, Liquid natural gas. These big trucks, the only trucks strong enough to transport the heavy containers in and out of the ports, were contributing considerable amounts of pollution to the air in the LA basin.. The ports chose LNG for many reasons including safety and cost. Even with the expense of replacing diesel engines with LNG engines the ports look to save around $350 million each year. The ports have announced the approval of a new $1.6 billion Clean Truck Superfund. Wal-Mart, which operates one of the largest truck fleets in America, is testing four trucks to measure the possible money saved by the switch. I am certain other truck users are carefully watching the results.”

The ambitious Clean Trucks Program has reduced air pollution from harbor trucks by nearly 80 percent as of January 1, 2010. The Port banned trucks with 1993 and older engines, and almost all trucks with 1994-2003 engines. The program will also ban all trucks that don’t meet 2007 emission standards by 2012. With the industry replacing vehicles much sooner than expected, the result is a major reduction in air pollution two years ahead of the original schedule.

This is but a single instance of successful efforts to change one energy system and simultaneously reduce both environmental and operating costs. Currently, there are many other such efforts underway throughout the country. These range from hybrid and pure electric vehicles now coming to market to new systems for generating electricity, to new non fossil fuels.

There is no one answer to our energy problems. Whether or not we are running out of cheap petroleum is actually irrelevant. No matter how you look at it, it is quite obvious that petroleum products are continuing to rise in price. This can make alternative energy systems more attractive to buyers. There are countless technologies that could not compete successfully when oil was at $20 a barrel that would be very competitive with oil at $100 a barrel. Electric cars that were at a per mile cost disadvantage when gasoline was $1.50 per gallon now cost a third of cars powered by $4 per gallon gasoline.

Many new and different technologies will compete for the energy buyer’s dollar. This competition will gradually weed out poor performers and expand those that show the lowest cost. Then there is always the specter of catastrophic global warming driven by increasing atmospheric carbon dioxide. Whether real or not, there are enough believers to make it necessary to at least consider it

Increasingly, environmental costs are being considered in the overall equation. Many times these types of improvements have been found to pay back the investment in less time than anticipated. That is an everybody wins scenario. There is a major change underway. It will be quite some time before the marketplace determines the winners and losers.

Written by Howard Johnson, engineer/author. The opinions expressed in this article are solely those of Howard Johnson.

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