Energy Accounting Design

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Energy Accounting Design

This document outlines the design specification for an Energy Accounting system.

Introduction

The current socioecomioc system uses and debt based monetary system to enable people to purchase goods. This system has a number of problems with it; it results in a small percentage of the population controlling most of the resources of the planet [UN_WIDER], it creates poverty and starvation, and it has a fundamental unsustainable nature to it. Thus, we propose an alterative system based on the energy it takes to produce goods within the system. Our proposal starts from the fact that the production of goods forms an example of a physical resource allocation system and as such requires energy to run. The energy available places a limit of what the system can do. This design has the following lay out. First, the design presents the science behind the design; thermodynamics, then the application of thermodynamics to economics. The next section looks at the economic system as a resource allocation system. The final part then presents a design for an alternative, sustainable, system.

Thermodynamics

The term thermodynamics refers to the science of energy exchange between two systems that result in a temperature change. The term heat refers to this energy transfer. Scientists largely developed the science of thermodynamics during the 19th and 20th centuries where they developed three laws of thermodynamics.

Zeroth Law of Thermodynamics

This law deals with systems in balance. When two systems reach thermal equilibrium they have the same temperature.

First Law of Thermodynamics

The first law deals with the conservation of energy. In a thermodynamic system energy flows into or out of a system as heat causing and change in the internal energy of the system and / or work.

• U = Q - W

Where U stands for the internal energy of the system, Q for the energy added to the system as heat and W for the work done. Thus, we can account for all energy entering or leaving the system.

In a thermodynamic system, every event that occurs occurs as a change of energy.

Second Law of Thermodynamics

The second law of thermodynamics deals with the quality of energy. The first law says that we can change energy from one form to another. The second law puts limits on this change. We can only change energy from higher quality to lower quality. Or:

• The system progresses from a state of order to a state of disorder as entropy increase.

• S = Q/T

Where S = entropy and Q = heat added and T = temperature.

This also means that as we convert one form of energy to another we encounter losses in the system and the available work decreases.

Entropy can decrease on a local level but for the system when including the environment, the overall entropy increases.

Third Law of Thermodynamics

The third law deals with systems that approach absolute zero.

• As a system approaches absolute zero, motion approaches zero and entropy approaches minimum.

Exergy

The term "exergy" refers to the usable energy for a physical system and follows from the second law of thermodynamics; we cannot full change heat to work. Energy comes in different forms such as potential, chemical, kinetic and electrical energy. Not all forms of energy have the same potential to produce work. We can convert electrical energy completely to work but cannot convert heat energy fully to work [Wall].

As any socioeconomic system requires energy to work we can measure how much available energy (as exergy) we have and that will give us a measure of the system's ability to produce.

A socioeconomic system not only needs energy but also materials. We can also use exergy as a measure of materials. This follows from the materials having a chemical potential. Thus, the exergy, Ex, we have becomes:

In addition, information can also have an exergy value. This follow from the application of statistical mechanics and information theory where we can define a particle as have one bit of information.

As we can use exergy to measure usable energy, materials and information that a socioeconomic system utilises, exergy, therefore, forms a common accountancy unit for any socioeconomic system.

Exergy has an additional property of use for a socioeconomic system; exergy has a relationship to the environment. The greater the difference a system exhibits between itself and the surrounding environment the greater the exergy becomes. Thus ice in the tropics has a higher exergy value than ice in the Arctic. Heating has a higher exergy cost in the winter than in the summer [Wall].

As exergy forms a common accountancy unit and has a relationship to the environment we can use exergy as a control variable for a resource allocation system such as a socioeconomic system.

The Thermodynamic Interpretation of Economics

The term Thermoeconomics refers to an economic theory resulting from the application the laws of thermodynamics to economics, especially the second law.[1] Early work on the subject starts with Frederick Soddy's Wealth, Virtual Wealth and Debt (George Allen & Unwin 1926), but the term originates with the American engineer Myron Tribus in 1962,[2][3][4] and developed by the statistician and economist Nicholas Georgescu-Roegen.[5]

A Thermoeconomic Theory of Value

As the second law of thermodynamics and information theory have a link we can also see thermoeconomics a statistical physics of economic value.[6]

Where V(X)represents the value of product X. The positive integer, b, represents the number of producers and p the probability measure. This leads to products with a high number of producers having low value and a products with a low number of producers having a high value. A value of P = 1 represents a state of abundance and the value of a product equals zero.

Production and Competition

Thermoeconomics models systems as acquiring low entropy from the environment and forming structure. In economics these structures are business and products which compete with each other. In thermoeconomic terms this process becomes:

Where the entropy, S represents the economic value and r the rate of price change over time. Sigma represents the rate of uncertainty.

Production has associated fixed costs and variable cost, both connected with entropy. In thermoeconomics the cost becomes:

Where N(x) represents the the cumulative probability distribution function for a standard normal random variable. The varible K represents the variable costs.

A Distributed Resources Allocation System

A socioeconomic system based on exergy becomes a resources allocation system where we would have a system that uses state variables to control the system. The system would use exergy to measure the production cost of an item so each item produced would have a cost that reflects the physical cost of that item rather than a subjective monetary value. A society would also have a certain amount of exergy available for the production of each item and the processes that go into maintaining and running society.

A hi-tech society consists of people who require goods. Production faculties produce these goods using resources, such as ores extracted from the ground or food crops grown on farms. This system requires energy to function. Therefore, we can define an Energy Accounting system as a resources allocation system consisting of a *tuplet* Ra(R, E, P, G, H) where:

• R(x: is a resource)
• E (x: x is an energy producer),
• P(x: x is a production facility),
• G(x: x is an item) and
• H(x: x is a person)

The problem then becomes one of allocation R(r) and E(e) to P(p) to produce G(g) and allocating G(g) to person H(h). The resource allocation problem then becomes one of allocating exergy to production based on the user initiated demand for goods and the maintenance requirements of the system. We could do this through calculating how much exergy we would have available for the system, within a given time period, as a whole allocate x amount for the system maintenance and large common projects then distribute the remainder equally among the user base as "Energy Credits" (EC). The ECs effectively represent production capacity and the users can then allocate EC to production to acquire personal items.

The elements of this system have different geographical locations. The resources tend to have locations different to the major cities which form the location for most of the people which can differ again form the production facilities. Thus, raw materials require transporting to production facilities and good require transportation to the people. Thus, the system has the essential characteristics of a distributed system. Scientists have conducted much research into distributed resource allocation systems.

This system does not fall into the classification of a planned economy as people, h, drives the goods production and resource allocation so the system forms an example of a demand driven system. However, demands often follow patterns which can mean some planning can take place within the system. For example, the system tends to experience a rise in demands of seasonal goods around certain seasonal festivities such as the mid-winter holidays and some goods tend to have a more or less constant demand through out the year, such as day to day domestic goods.

Energy Accounting Design

An energy accounting system should present a means of resource accounting and allocation of production capacity to people. As all processes forming a socioeconomic system requires energy and materials to work the energy accounting system should monitor the materials and exergy available as well as demand on the system.

The production of goods has two aspects to it. The external and the internal.

1. The external aspect. The people place demands on the system for the manufacturing of goods. The people place their demands through the allocation of energy credits to the production of goods.

2. The internal aspect. Experts manage the production facilities to insure maximum utilisation of resources, the sustainability of the system and to ensure the needs of the system remain within the limits of nature and balance with those of the eco-system.

Thus, the design for the Energy Accounting System has two aspects.

1. The user interface in the form of Energy Credits (EC). Each EC measures the production capacity in terms of energy (or exergy). Each citizen within a technate has an equal share of ECs allocated to them. They can then allocate their ECs to the production of personal goods.

2. Technical management of the system. This involves the measurement of the production capacity and materials available. The allocation of ECs to individuals as well as carefully managing the resources for production.

Energy Flow Within a Technate

The technate operates by allocating energy. What we often neglect to say is that the technate, apart from allocating a buffer of energy at the disposal of the users, also need to allocate energy to maintain the infrastructure of residential, social, recreational, industrial and sustainable infrastructure, as well as for the transport network.

We can see the energy as the "necessary energy expenses" for maintaining the technate. We could call it energy A. It should'nt fluctuate much over time, at least not in an advanced technate, and this should form characteristics of this kind of energy.

Then, we will have the energy needed to excavate new resources, to research and to upgrade technological infrastructure. we could call it "necessary energy expenses for research and development", and its costs could fluctuate over time. We could call this type of energy B.

A+B forms basically the needed energy usage for the operation of the technate itself, and this energy should form a distinct set separate from that which is allocated to the users.

Now we come to the energy share which the system allocats to the users, namely C. Bear in mind that we do not locate energy physically to each person, but rather allocates a share of the resources to an overall "user budget" which we divide between all the x million users of the technate. These would later use their shares as they see fit, and arrange their own allocation of what they need and want. When they do so, the technate will allocate the needed energy to production in order to produce what the users have asked for. We could call this energy a*, because it is "passive" in the sense that the technate does not have any authority over what the people used it for.

We also have b* energy share we must mention, namely the completely passive "energy reserve", comprising the 10-20% energy potential which we deem we should use as a buffer in order to counter both natural but frequent fluctuations as well as unforeseen emergencies.

Energy Credits

Energy Credits forms part of the resource allocation system. In such a system, people use Energy Credits to allocate parts of the system to the production of goods. [Fez38, EngB55, Wal07] We have resources, production and goods people want. We take the resources move them to production and produce the goods needed. That takes energy to do, so we can measure the production capacity in terms of energy. We can then divide that up equally among the citizens. Those citizens can then allocate production capacity to the production of goods.

Energy credits have a number of characteristics

1. Citizens cannot save Energy Credits as we cannot use production capacity not used in one accounting period in another accounting period.

2. The system allocate Energy Credits to individuals and as we have an internal management of the system, we do not allow the transfer of Energy Credits form one person to another.

Circulation within a technate

The above diagram gives the circulation of energy (E), materials (M), goods (G) and Energy Credits (Ec). Materials flow from a material source, such as mines, to production. Production produces demanded goods which then flow to the households. When the goods reach the end of their life expectancy then flow back as raw materials. Energy credits flow from the house holds to the production. The energy generator produces the energy required in production and for the house hold. Energy comes from some source. The central experts managers block manages the production, raw materials and energy production. They also issue new energy credits after each accounting period.

Management of the Resource Allocation System

The resource allocation will need management to efficiently control the system and to minimise production and environmental damage, if we wish to have a sustainable system, as well as determine the cost of an item.

Determining an item's cost

Physical variables determines the cost of an item in the presented system rather than the subjective valuation of a (free) market. We express the cost in terms of exergy so each item has an exergy value giving the amount of exergy consumed in the items production. We can use Life Cycle Analysis (LCA) as a method for determining an items cost.

The term LCA refers to a method of determining the processes and their impact for the production of an item from the beginning of production until the disposal of the item. From the acquisition of the raw material to the production of the parts to the production of the final item and then later the disposal of the item. LCA assess the contribution to environmental damage and resource depletion but it could also record how much exergy the process of producing an item consumed at each stage. How much in acquiring the raw materials? In transporting the parts? In producing the whole? and in disposing of the item?

LCA analysis begins with defining goals and boundaries for the study. It then goes on to perform an inventory analysis. During the inventory analysis the assessors collect data on the system for the items production as well as model the whole process.

After data collection, the assessors evaluate the impact of the process in various categories. We can then evaluate these impacts and determine the actual physical cost in terms of exergy for a given item.

Cost Benefit Analysis

Cost Benefit Analysis forms a technique for assessing the pros and cons of the production of a item. Normally, a CBA states the costs in monetary terms. For a socioeconomic system based on exergy the CBA would use exergy as the unit of cost. This gives a more objective assessment as exergy directly relates to the physical state of the system, whereas money does not [RahDev, Owen]. Also, the use of exergy enables the assessors to fully assess the costs of an item as all benefits and cost would utilise the same accountancy unit. So, for example, the environmental impact would have an exergy cost which would lead to a more realistic assessment of costs compared to a monetary based assessment where assessors can ignore much of the environmental cost if it doesn't have any direct money value (such as if the polluter doesn't have to pay).

Optimisation

Management of the system aims to minimise impact on the environment and maintain a sustainable system. To do that, the management process would need to optimise the production of goods so that production use the minimum amount of materials and energy for the maximum amount of life expectancy. [Fran]

The optimisation problem involves a set of functions to optimise and a set of boundary criteria. An exergy based socioeconomic system would have the optimisation functions:

maximise life expectancy (L)

minimise material and energy (exergy cost)

Where and represent the optimisation functions.

Subject to the follow constants:

within the limits of the available energy and material supply as well as environmental impact (I).

For example, an item such as a car, requires a certain amount of material of a given type; steel, aluminium or plastic. Each possibility for construction has a certain cost for production in terms of exergy; exergy using in extraction of the raw material, referencing and production of the base material as well as transportation. Each material will also have an associated life expectance. So, the optimisation problems comes down to maximising the life expectance for the minimum exergy cost such as a plastic construction might have a lower exergy cost but shorter life expectance than steel and aluminium might last longer than steel but have a higher exergy cost. At some point we would have the optimal material for a given cost.

Engineers have a variety of optimisation methods available, which include the following:

• 1. Calculus (max and min)
• 2. Pinch method
• 3. Convex optimisation

Calculus (max and min)

Calculus forms the basic method for optimising functions through first and second derivatives to find the maximum or minimum point of the function. Engineers could use calculus to find the point of maximum life expectancy and the points of minimum material and exergy usage as well as minimum environmental impact.

Pinch method

The pinch method forms an example of a widely used optimisation method, specially adapted for heat energy systems and engineers use the method of optimising large scale industrial processes [Pinch]. Two phases compose the pinch method; an analysis phase and a synthesis phase.

The analysis phase involves the collection of data form measurements of the actual system and simulations. The analysis phase also uses site expertise to validate the data. From the data, engineers develop models of proposed changes. They then assess the impact of the proposed changes. The analysis phase involves iteration around a loop.

The synthesis phase aims to effect actual improvements in the system.

Convex Optimisation

The term convex optimisation refers to a set of techniques which includes least square fit and liner optimisation. Once defined as a convex problem, engineers can often find the solutions for optimising a certain criteria within given limits using well known methods such as solving simultaneous equations.

Examples

Example 1

For this example we will use an artificial situation consisting of three scenarios. This example has the purpose of demonstrating the basics of basic characteristics of an Energy Accounting system. In this example:

1. A society has a production capacity of 100 units

2. Each production unit takes 1 energy unit

3. We have 10 citizens in our society.

100 unit production capacity at 1 energy unit for each unit would give us a total production capacity in terms of energy as 100 Energy Credits. With 10 citizens in our society, each citizen would have 10 Energy Credits, which they can use to allocate production to produce goods they require.

For the three scenarios:

1. Scenario A forms the base for the other scenarios. In this scenario each person orders a certain amount of goods for a given accounting period (say each year):

In this scenario, the system produced 48 items but had the capacity to produce 100 items, so the system ran at 48% efficiency.

2. Scenario B we increase the efficiency of our production system. Increased efficiency means the amount of energy required decreases. It now takes less energy to produce the same number of goods. For this example it will take 0.5 energy units to produce 1 item. We still have a capacity for 100 items and 10 citizens so now we have a production capacity of 50 Energy credits and each person receives 5 Energy Credits.

Each person orders the same number of goods but now they allocate less energy credits to the production of those goods. The system still runs at 48% efficiency.

3. In scenario 3, we increase the production capacity and return the efficiency to the same level of scenario A. We now have the capacity to produce 200 units at 1 energy unit each. We still have 10 people so that gives 20 Energy Credits each.

With the same number of goods demanded we still produce the same number of items. However, we now have an efficiency of 24%. In a sense, it doesn't matter how much ECs each person needs to produce the goods so long as people have enough ECs to produce the a goods they need. Thus, we can say an association with the physical system forms another important and relevant characteristic of Energy Credits.

Example 2

This example uses a type energy requirement for a household in the UK for one year [DTi].

Each household uses the following amount of energy:

• heating 13 490 kWh
• Lighting 750 kWh
• Cold 723 kWh
• Cooking 590 kWh
• Drying 530 kWh
• other 653 kWh

If we take 1 EC = 1 kWh, each household would need to allocate a average amount of ECs equal to 16736 EC (kWh).

Example 3

This example looks at exergy in Sweden [Wall1]. In 1980 Sweden had the following exergy:

• About 1 million PJ of Sun light, which space heating used 20 PJ and plants used the remainder (so we count just the human used part).
• About 330 PJ in wood.
• About 328 PJ in vegetable / crop production.
• About 24 PJ in animal production.
• About 340 PJ in electricity from hydro, nuclear and fossil fuels.
• About 24 PJ of iron.
• About 284 PJ of uranium.
• About 1140 PJ of chemical exergy (mainly in oil)

This gives about 2490 PJ of exergy available for Sweden. Various processes loose some of this exergy, for example the electricity network which looses 33 PJ in transporting electricity to users homes. Some processes also use exergy, for example, the iron industry used 114 PJ to produce 24 PJ worth of iron. For an energy accounting system the losses and the used exergy should also form part of the cost of the item. Thus, if Sweden used energy accounting in 1980 the citizens would receive 2490 PJ in energy credits divided between them.

Although a bit simplistic, this examples illustrates the general idea of energy accounting.

References

• [UN_WIDER] The World Distribution of Household Wealth. James B. Davies,1 Susanna Sandström, Anthony Shorrocks, and Edward N. Wolff. World Institute for Development Economics Research of the United Nations University. 2008
• [Wall] Göran Wall. Exergetics. 2009
• [Fran] C. A. Frangopoulos, (2004/Rev.2008), OPTIMIZATION METHODS FOR ENERGY SYSTEMS, in Exergy, Energy System Analysis, and Optimization,[Ed.Christos A. Frangopoulos],in Encyclopedia of Life Support Systems(EOLSS), Developed under the Auspices of the UNESCO, Eolss Publishers, Oxford ,UK, [1] [Retrieved 12 March, 2010]
• [RahDev]SM Osman Rahman, Stephen Devadoss, (2005), ECONOMIC ASPECTS OF MONITORING ENVIRONMENTAL FACTORS : A COST-BENEFIT APPROACH, in Environmetrics, [Eds. Abdel H. El-Shaarawi, and Jana Jureckova], in Encyclopedia of Life Support Systems (EOLSS), Developed under the Auspices of the UNESCO, Eolss Publishers, Oxford ,UK, [2] [Retrieved 5 February, 2010]
• [Owen] Anthony D. Owen, (2004), ENERGY POLICY, in Energy Policy, [Ed. Anthony David Owen], in Encyclopedia of Life Support Systems (EOLSS), Developed under the Auspices of the UNESCO, Eolss Publishers, Oxford ,UK, [3] [Retrieved 5 February, 2010]
• [Wall1] Wall, G., Exergy Conversion in the Swedish Society. Resources and Energy. vol. 9, pp. 55-73, 1987.