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

© UHCBA Energy Institute 2 Measuring Energy We measure: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)

© UHCBA Energy Institute 3 Measuring Energy Some conversion factorsSome 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))

© UHCBA Energy Institute 4 Measuring Energy Common unit that measures the “heat content” is Btu: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 = Btus

© UHCBA Energy Institute 5 Measuring Energy Some examplesSome examples –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 informationSources for further information – (Annual Energy Review) –

© UHCBA Energy Institute 6 Measuring Energy 1 cubic meter of gas = 35.3 cubic feet of gas = barrels of oil equivalent = tons of oil equivalent1 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)

© UHCBA Energy Institute 7 Energy Efficiency THERMAL Oil 4 Coal 13 Gas 4 Nuclear 6 Hydro 8 Other Combustion Heat and/or mechanical energy Generator system Photovoltaic Fuel Cell Electricity Input: 35 mboe/d Output: 11 mboe/d or 6,825 TWh/yr

© UHCBA Energy Institute 8 Energy Efficiency Output equivalency:Output equivalency: –11 mboe x 5.8 mBtus x 365 = 23,287 x –1 TWh = 10 9 kWh = 3,412 x 10 9 Btus –23,287 x / 3,412 x 10 9 = 6,825 TWh EfficiencyEfficiency –Input: 35 mboe x 5.8 mBtus = 203 x –Output: 11 mboe x 5.8 mBtus = 63.8 x –Efficiency: 63.8 x / 203 x = 31.4%

© UHCBA Energy Institute 9 Energy Efficiency Heat rate: 3,412 Btus / efficiency rateHeat 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 kWhIf 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(Heat rate/Btu content of 1t of coal) x Price of coal = (10,866/20,000,000) x 30 = 0.016

© UHCBA Energy Institute 10 Energy Efficiency 10,866 is very high and represent old technology; new combined-cycle gas plants have a heat rate of about 6,000.10,866 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! ( however, that fuel cost is only part of generating electricity! (