Techno-Economic Aspects of Energy Systems

  • Energy affects economic activity
  • Economic considerations affect energy choices

Big Picture

  • Countries with higher energy use per capita have higher GDP per capita

Energy vs GDP by country

Techno-economic analysis

Two very important factors in energy decisions are technology and economics.

Many energy technologies “work”. That is their technology is reliable, but they may be too expensive to compete with other technologies.

A techno-economic analysis asks

  • Is the technology mature?
  • Can it compete with other alternatives?

Economic Incumbency

Energy systems have incumbents who benefit economically from the status quo.

Stranded Assets

Asset owners want to retain the value of their assets. Economic incumbents then have an interest in any decision that would change the value of their assets.

The refinery closures in California provide examples of incumbent behavior.

Decommissioning Costs

Decommissioning costs are the costs to take an energy asset and dismantle it at the end of its life.

Liberalization and Privatization

Over the past several decades, many government-owned aspects of the energy system have been moved to private ownership.

Municipalization

Some communities have publicly owned energy infrastructure.

These are called Public Power Utilities or Munis.

As of 2026, San Francisco is exploring the municipalization of their power system by buying out PG&E.

Levelized Cost

One way of comparing energy prices is to divide the initial and recurring costs by the amount of energy delivered.

This gives you a cost per unit of energy that can be compared.

Economic Dispatch

It is very common in the electricity sector to buy electricity from generators from cheapest to most expensive until the need is met.

Building Costs

A rule of thumb for many business buildings is that energy costs $3/square foot per year, rent costs $30, and salary costs $300.

Energy is a small contribution to total expenses and may not get the attention of building managers.

Environmental Impact

Policy makers are also considering the impact of energy technologies on the environment.

Important questions are

  • What effects does the system have on the environment?
  • What are the effects of the competing or status-quo system on the environment?

Pollutants include

  • Carbon emissions
  • Toxic gases, liquids, and solids

There are also wildlife impacts.

Ecosystem Services

Ecosystem Services is an attempt to place an economic value on things (air, water) provided by the ecosystem.

With an economic value, environmental concerns could be added to a techno-economic analysis.

Economic Impacts

The social cost of carbon is an attempt to quantify the monetary impact of carbon-emitting fuels. It includes climate and health effects.

Stakeholders

Stakeholders are people who have an interest in a decision.

  • Asset owners
  • Business owners
  • Community members
  • Governments
  • Regulators

Perspectives or Lenses

  • Technology
  • Environment
  • Economics
  • Stranded Assets

Contested Norms

  • How much should we invest in the environment?
  • What should the discount rate (the value we give money in the future) be?
  • What is the role of the government in providing support to energy technologies?

Further Reading