Energy and Economics : public choices and market incentives

Energy is a "final consumption" good, enabling people to heat their homes, get around, light their homes, or operate household equipment ranging from computers to washing machines. It is also an "intermediate consumption" good when it is used in the production process to manufacture other goods and services.

The energy flows consumed by a country over the course of a year are included in the energy balance. This energy may be produced locally or imported. It can be obtained from a stock of resources (coal, oil, gas, uranium, biomass) or produced by a flow (hydraulic, solar, wind). This energy is sometimes qualified as "renewable" if the quantity consumed during the year does not reduce the quantity available for the following years, either because it is a flow (hydraulic, solar or wind power), or because the initial stock has been reconstituted (biomass taken from a forest that has been replanted), and sometimes as "non-renewable" if the withdrawal is made from a finite stock that may eventually run out (as in the case of coal, lignite or hydrocarbons).

The internationally recognized legal unit is the joule, which corresponds to the work done by a force of one newton whose point of application moves one meter in the direction of the force (in practice, this is the work done to lift an apple one meter). But economists prefer to use a much more evocative unit: the tonne of oil equivalent (toe), whose calorific value is conventionally set at 42 GJ (gigajoules). The various forms of energy can be accounted for in terms of money (the dollar, for example); they can also be accounted for on the basis of so-called equivalence coefficients, by reducing everything to a reference energy, oil in general, which is disputed by some because these coefficients are often chosen in a conventional, and therefore controversial, way. In France, as in many other countries, the method used is that of the IEA (International Energy Agency).

By convention, one tonne of coal is equivalent to 0.619 toe, one stere of wood to 0.147 toe, and 1 MWh (megawatt-hour) of natural gas to 0.077 toe. The problem becomes even more complicated when the various forms of electricity are taken into account. The calorific value of 1 MWh is equivalent to 3.6 GJ, i.e. 3.6/42 = 0.086 toe. This is the coefficient used for all forms of electricity (thermal coal, oil, gas, hydro, photovoltaic, wind) except for nuclear (and, incidentally, geothermal). Nuclear-generated electricity is accounted for using the "production equivalence" method, i.e. on the basis of the quantity of oil that would have had to be used to produce the same quantity of electricity, giving, using a theoretical conversion efficiency equal to 33%, 1 MWh = 0.086/0.33 = 0.260606 toe. (cf. DATALAB, French Ministry of the Environment...