EROI: Energy Return On Investment

8 minute read

Bicycle rickshaw pullers in the hot, bustling cities of India migrate from rural areas to earn a seasonal living, driven by the economic norms instituted in the country that allow for a vast number of people to live in abject poverty.  Rickshaw pulling is very physically intensive; pullers often travel over 25 kilometers a day carrying a heavy load that puts a strain on their bodies. A study conducted on rickshaw pullers in Kolkata, West Bengal, calculated the average calories required to haul their daily load  to be 4005 Calories per day, while their average consumption was only 3884 Calories per day. Anyone looking at these numbers could tell you there is an imbalance here: the energy expended by the rickshaw pullers through their labor is more than the energy gained by eating food. The continuation of such energy deficits leads to malnutrition and other physical maladies in the rickshaw pullers; in other words, without the correct energy input, the system fails. 

Barefooted Rickshaw Driver, Kolkata India

Obesity in the so-called United States is the perfect example of the inverse effect: an energy surplus through the overeating of fatty foods. An ample supply of cheap foods in energy-soaked American society, as well as a lifestyle without much need for physical exertion allow for Americans to live sedentary lives while consuming beyond their needs. In other words, they intake more energy than they expend. A form of analysis that studies such energy balances is EROI — Energy Returned on Investment: the ratio of energy output to energy input. So, why do we need a fancy-sounding acronym to tell us this simple fact? We can add and subtract, we can see the effects with our eyes, and it makes sense logically. But not all energy systems are as simple as a single input versus a single output. The important part of EROI analysis is that it allows us to simplify more complex energy systems and glean necessary information from it. The insight that it provides allows us to understand the efficiency of energy systems, as well as the nuances that come with the valuation of said energy. Efficiency and the valuation of energy are closely tied, as we will see after defining EROI.  

The EROI ratio is defined by the following equation:

EROI = \frac { E_{out}}{E_{ext} + E_{int}}

Eout is the energy produced, or received by the process, Eext is the energy input from outside the system, and Eint is the energy inside the system that goes towards energy production. With the example of an oil rig, Eext would be the energy put into running the rig, drilling into the ground and extracting and refining the oil, Eint is the oil that is expended in the drilling process, and Eout is the final product: the oil produced. 

Oil Rig, Oklahoma, so-called USA

An EROI value greater than 1 tells us that the energy output is greater than the energy input, meaning that it is an energetically viable task. However, it is important to remember the context of the energy system being studied to evaluate what exactly this means. Typically, EROI is used to study energy extraction systems, therefore, it is important that the output be larger than the input: the oil rig produces more oil that it consumes in the extraction process, which makes it viable. The larger the output-to input-ratio, the more efficient the process is. In the case of the rickshaw pullers, Eout is the 4005 Calories per day expended, Eext is the 3884 Calories per day consumed, and Eint is considered negligible. The EROI value calculated for this interaction is 1.03. While it is larger than 1, it is in the interest of human health to consume more calories than are expended; so, while this is an efficient energy system, it is not conducive to the health of the workers. As we can see, EROI efficiency can mean different things based on the context of the system.

A ride to school

Taking the analysis one step further, it should be noted that it is not the rickshaw drivers’ voluntary lack of eating that causes the energy deficit to occur; the controlling factor here is the valuation of the energy expended. The money received for their transportation services is not enough to allow the pullers to maintain their energy input. Who benefits from this interaction? The passengers, of course. The rickshaw transportation system hinges on the undervaluation of human energy, allowing the average passenger to receive a cheap ride around the city. This interplay of EROI and the valuation of said energy is what makes the process efficient (for some), and is emblematic of all modern energy systems. 

Below is an infographic from Scientific American outlining the EROI’s of various energy forms produced within human systems. Forms of oil are in Figure 1, while renewable sources are in Figure 2. 

Figure 1: Put together by Scientific American’s Mason Inman

An important concept explored in this graphic is the idea of a minimum EROI. What this means is that while an energy process may be efficient in the sense that it has an EROI greater than 1, it needs to be even greater to do more things with the energy produced. 

“If you’ve got an EROI of 1.1:1, you can pump the oil out of the ground and look at it. If you’ve got 1.2:1, you can refine it and look at it. At 1.3:1, you can move it to where you want it and look at it. We looked at the minimum EROI you need to drive a truck, and you need at least 3:1 at the wellhead. Now, if you want to put anything in the truck, like grain, you need to have an EROI of 5:1. And that includes the depreciation for the truck. But if you want to include the depreciation for the truck driver and the oil worker and the farmer, then you’ve got to support the families. And then you need an EROI of 7:1. And if you want education, you need 8:1 or 9:1. And if you want health care, you need 10:1 or 11:1.” 

– Professor Charles Hall

Keeping this in mind it can be seen that the current EROI of conventional oil (this will change after peak oil)  far exceeds the requirements of industrial society with an EROI of 16; as further processing and energetic requirements (Eint) are placed on the production end, the EROI’s lower, ending with ethanol produced from corn at 1.4. 

Figure 2: Also from Inman’s work

Renewable sources of energy are competitive with oil in terms of EROI; hydroelectric power tops the chart at an EROI of 40. The efficiency drops in the case of nuclear power as the expended energy of mining and uranium enrichment pulls the EROI down to 5. 

Both charts allow us to compare and contrast different energy sources using a similar metric; we can tell that natural gas extraction is a more intensive process than coal mining, and that solar power is not as good of an energy source as wind. But there are shortcomings to every EROI analysis. EROI doesn’t capture scale as, in the case of wind energy,  EROI does not tell us anything about the actual hydroelectric capacity in the world and whether it is a resource that can power industrial society. Another shortcoming highlighted in this particular study is that the analysis includes the construction costs but fails to account for the mining of lithium batteries, or the energy required for maintenance of large scale wind farms; it doesn’t capture the full picture. This limitation depends on the prescribed boundaries of the analysis, as complete life cycle assessments are difficult and expensive to perform. This means that while EROI is a good method for determining the energetic or thermodynamic viability of energy extraction systems, there are other determining factors that affect their roles in industrial society. 

Brazilian semi-submersible oil platform

Energy in human systems is built around fossilized carbon; not only due to its great EROI but also its transportability, storability, and its ease of access. Due to these factors, extracting and selling fossil carbon is cheap in the current market. Just like rickshaw pullers are made to be a cheap source of energy for the benefit of riders, so does fossil carbon provide a cheap source of energy to power human industrial society. By valuing fossil carbon cheaply, less energetically viable processes, such as Canadian tar sands oil and fracking, are made more viable. Cheap fossil carbon powers other fuel sources as well. Is wind viable because lithium mining for the batteries is made possible by fossil carbon machinery? Is solar viable because the construction and maintenance is powered by fossilized carbon? Valuation of energy sources plays a huge factor in determining EROI, but it is not the end-all-be-all answer to energy viability in human systems. One must consider economic forces, valuation of human and energy labor, and the finite nature of natural resources. 

EROI is a tool to examine the energetic efficiency of energy processes and systems. But it is not a holistic analysis of energy viability for running current industrial systems. The interplay of economics, energy valuation, and the real energy extraction processes themselves can often hide or disguise physical and thermodynamic limits. The usefulness of EROI lies in the realm of understanding the energetic inputs and outputs of our current systems, and the discerning of solutions that are energetically viable. 

Works Cited
Brandt, Adam R. “Oil Depletion and the Energy Efficiency of Oil Production: The Case of California.” Sustainability 3, no. 10 (October 12, 2011): 1833–54.

Das, Pranab. Nutrition Status of the Hand Rickshaw Pullers of Kolkata: A Case Study, 2019.

Das, Pranab, and Nilanjana Das. “ Society of the Hand Rickshaw Pullers of Kolkata and Their Environmental Conditions a Study in Social Geography.” University of Calcutta, 2016.

Inman, Mason. “Behind the Numbers on Energy Return on Investment.” Scientific American. Accessed August 11, 2020.

“Will Fossil Fuels Be Able to Maintain Economic Growth? A Q&A with Charles Hall.” Scientific American. Accessed August 11, 2020.

Risk and Well-Being. “One Reason We Struggle to Grow: Energy Return on Investment (EROI),” April 7, 2013.