Why the Cost of Energy is Key to Sustainability

Article By : Maurizio Di Paolo Emilio

Alex Lidow analyzes the cost of energy and its key points: energy generation, distribution, storage, conversion and usage costs.

The price of anything is proportional to the cost of the energy necessary to get that thing. Even gasoline poured into employees’ tanks and other types of energy required during the many phases of manufacturing are the true costs. In his keynote address at the Green Engineering Summit, Alex Lidow, CEO of EPC, emphasized that the cost of energy is comprised of multiple components and that we must consider the cost of energy, not the price, when analyzing these component costs. Then what are these components?

According to Lidow, there are six costs associated with energy: the cost of generating it, the cost of distributing and storing it, the cost of converting it, the cost of using it, and the cost of cleanup. This last one is arguably the most significant. The first five of these costs are in-period costs, which means it is very clear how much it costs to generate and how much it costs to distribute and store. But what is out of period, and therefore less clear, is the cost of cleaning up from the usage of the energy. Just think of global warming or cleaning our rivers and lakes. The cost of cleanup is a deferred cost, which we borrow today to be repaid by future generations. So the cost of cleanup is a crucial element, as Lidow explained.


The most important thing to understand is that 85% of the energy we use comes from burning fossil fuels. Now let us analyze the consumption of this energy. The graph in Figure 1 shows that, for example, our energy is consumed in the form of petrol for cars and planes but also in the form of oil for lubricants for plastics, coal, sometimes for heating, and sometimes for steel production, and electricity accounts for only 30% of energy consumption.

Figure 1: Energy is consumed in many forms.

Analyzing how our actions affect the environment and coming up with ways to make them better is one option we might take into account. “One very key thing is to shift the energy sources,” said Lidow. “For example, you can go from coal to natural gas. Natural gas emits fewer greenhouse gases for every unit of energy kilowatt hour that is produced. We can also shift to nuclear or renewables. Each of these has a different equation as to the overall cost.”

Renewables, such as solar and wind, have the disadvantage of it being costly to store energy when there is no sunshine. However, nuclear power has the drawback of being expensive to secure against terrorism and other natural disasters, as well as being expensive to clean up nuclear power plants. As a result, each of these factors must be taken into account.

“If you look at the environmental impact, this is a journey that we can maybe take, if the economics of it makes sense,” said Lidow. “We can also shift energy usage. So for example, we can take natural gas, coal, and oil and the way it’s used, and we can use it maybe more efficiently if it were in the form of electricity.”

Why is electricity intrinsically more efficient? Electricity is a journey of electrons, which have almost no mass. Therefore, transporting electricity is extremely cheap compared with transporting natural gas, coal, and oil. Electricity is therefore a good way to shift energy use to a more efficient method. Just think of electric cars compared with petrol cars. During his presentation, Lidow analyzed the equation that governs it.

The equation includes production, distribution, storage, conversion, consumption, and reclamation. Each of these phases in coal, natural gas, and all renewables consists of a number of components with varying costs. The most important thing to consider is storage. Because sunshine and wind are not accessible 24 hours a day, seven days a week, storage is a crucial aspect of wind and solar power. As Lidow stressed, “it is thus vital to add the aspect of storage, which has been one of the primary impediments to a more widespread use of these sorts of energy sources.”

Coal, natural gas, and oil are exceedingly simple and inexpensive to store at very high densities. As a result, as the price of batteries decreases, storage becomes more affordable and the transition to renewable energy gets simpler. However, as Lidow pointed out, reclamation costs must be considered.

Clean coal does not exist, so coal cleanup is highly difficult. Similar problems exist for natural gas and nuclear power, the cleanup of which, as Lidow said, has never been thoroughly studied. Therefore, each of these equations must be examined. This widespread shift in energy sources is essential for reducing global warming and pollution on a massive scale when considering the effect on the environment.

The most suitable industry for the transition from natural gas/coal and oil to electricity is transportation, including electric automobiles.

“In this shift in energy use, four elements are driving the change: storage, batteries, electric cars, and electric planes,” said Lidow. “The efficiency with which we can convert electricity is a key element, sometimes consuming half of the energy itself. As we become more intelligent in our energy consumption, the equation will probably become simpler. And of course, there is the cleanup and reclamation of electricity, which does not only depend on how it was generated, whether from a coal-fired power plant or a solar panel, but also on the electricity itself, which has certain elements, such as the reclamation of all the electrical equipment we have. How do we recycle it? Can we simply landfill them? Or can we find better ways to recycle and neutralize in our environment all the electrical gadgets that we consider almost disposable?”

Electricity consumption

Approximately 46% of all electricity is used by motors. The motors in your refrigerator, air conditioners, electric trains, and industrial automation are in the millions and billions. This represents 46% of the total power utilized in 2011. With the development of digital technology, it is projected that energy and power consumption would increase significantly over the years.

Efficiency of conversion, especially regarding power usage, is a significant factor. Several kilovolts of electricity may originate from an overhead power line. The voltage must then be reduced to provide the 0.8 V required to power the computer’s CPU. This needs many conversion processes.

“Over the years, enormous progress has been made in conversion efficiency,” said Lidow. “When I started working in this field in the late 1970s, the bipolar transistor was the key element in power conversion, with different ways of converting electricity from one voltage to another. However, with the arrival of the MOSFET and its cousin, the IGBT, I had the great honor of being present at the beginning of MOSFET development and was one of the pioneers in that area. And I think it is now well established that 30% to 40% of the electrical energy used was saved by switching from bipolar to MOSFETs. The higher speed, lower production cost, smaller size, and lower resistances — all these elements have contributed to better electricity utilization but also to changing topologies from the old linear power supplies to high-efficiency switched-mode power supplies, and all these elements have resulted in huge savings.”

We are now undergoing another revolution: the transition from silicon to wide-bandgap semiconductors like gallium nitride and silicon carbide. Lidow said that GaN and SiC will gradually replace MOSFETs and IGBTs in new uses, ultimately accounting for 100% of all new applications in the coming years.

Lidow said that owing to GaN, a significant amount of energy may be saved. First, we can save about 30% of the energy used by power supplies. And then about 20% of the energy produced by solar panels now may be conserved with the use of GaN, which makes solar panels considerably more efficient.  An additional 10% of all the electricity used for motion can also be conserved.

Therefore, a tremendous potential is estimated at over 1,000 TWh saved, or almost 8% of the total energy consumed for power today. Electric cars are an often-mentioned method of converting petroleum into energy. Figure 2 depicts the global energy usage in 2012, 51% of which is for industrial purposes. The equivalent of 2,300 megatons of oil is used for transportation, which accounts for 26.6% of the total (1 megaton of oil corresponds to 11.63 TWh).

Figure 2: Fifty-one percent of global energy use in 2012 was for industrial uses.

“However, the bottom line is that transport consumes 26,750 TWh annually, 70% of which are road vehicles, totaling 18,700 TWh, and less than 1% of these road vehicles are electric,” said Lidow. “If the world converted to electric transportation, there would be a huge opportunity for the market.”

Battery electric vehicles utilize about one-third as much energy as internal-combustion–engine vehicles, which represents a significant energy savings (Figure 3). If all automobiles were converted to electric, about 12,000 TWh per year would be saved. Now, GaN or SiC may power the motors of these automobiles. The benefit over silicon is about 10% to 15%. Thus, the total prospective annual energy savings vary from 100 to 1,800 TWh.

Figure 3: In 2012, transportation consumed more than 26% of global energy.


What about the increasing energy consumption in this world? “I started this journey thinking that I would do something great for the world by improving energy efficiency; then we would all consume less energy and pollute the environment less,” said Lidow. “But then I realized it was a myth. And the myth, the idea I want to dispel, is that you cannot reduce energy consumption by improving energy efficiency. On the contrary, you probably create more demand for energy.”

Lidow cited an example: Suppose that in one year, you used $1,000 of electricity to power your car. That’s a lot. And let’s assume that the car is 10% more efficient. So instead of $1,000, you spent $900 to power your car. What are you going to do with the other $100? You’re going to spend it on something that has its own cost of energy hours. So in the end, you increase your standard of living, you add another $100 to spend, but you do not reduce your energy consumption.

Let’s examine energy consumption. According to Lidow’s 2018 forecasts, energy consumption is expected to increase, as are the transport, commercial, residential, and industrial sectors. As a result, there is a substantial increase in demand, which is a consequence of the rising global standard of living.

“I said at the outset that the cost of energy affects all other costs,” said Lidow. “Therefore, by reducing the true cost of energy, people can live better. And our problem is to reduce the expense of living or increase living standard without destroying the environment.”

The driving factor is the cost of energy, which is badly skewed by out-of-period cleanup expenses. To make good decisions for the world, as Lidow argued, we must incorporate the cost of cleanup into the cost of energy use.

This economic change will push energy choices toward the most environmentally and socially responsible option. Lidow said, “Improved living standards drive the use of new energy. Energy efficiency may directly increase global living standards, and the arrival of wide-bandgap semiconductors, particularly GaN, will contribute significantly.”

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This article was originally published on EE Times.

Maurizio Di Paolo Emilio has a Ph.D. in Physics and is a Telecommunications Engineer. He has worked on various international projects in the field of gravitational waves research designing a thermal compensation system, x-ray microbeams, and space technologies for communications and motor control. Since 2007, he has collaborated with several Italian and English blogs and magazines as a technical writer, specializing in electronics and technology. From 2015 to 2018, he was the editor-in-chief of Firmware and Elettronica Open Source. Maurizio enjoys writing and telling stories about Power Electronics, Wide Bandgap Semiconductors, Automotive, IoT, Digital, Energy, and Quantum. Maurizio is currently editor-in-chief of Power Electronics News and EEWeb, and European Correspondent of EE Times. He is the host of PowerUP, a podcast about power electronics. He has contributed to a number of technical and scientific articles as well as a couple of Springer books on energy harvesting and data acquisition and control systems.


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