A unit of energy saved is worth almost exactly as much as one produced
The energy business stretches from oil rigs and coal pits to wind farms and the firewood gathered for cooking in poorer countries. Yet some of its most valuable output is energy never used: governments now subsidise conservation because saving power delivers nearly the same economic benefit as generating it.
The sector spans several families. Fossil fuel firms extract and refine oil, mine and process coal, and pipe natural gas, right down to the petrol station forecourt. The electricity industry generates, distributes and sells power. Renewable companies run hydroelectric, wind and solar plants and make alternative fuels. And a traditional trade in firewood still heats homes and cooks meals across much of the poorer world. Oddly, the United Nations' international industrial classification has no separate energy category, because it sorts by activity and product; North America's system roughly captures it in sectors 21 and 22, mining and utilities, while Morgan Stanley's standard limits it to oil, gas, coal and consumable fuels.
Every kind of economic activity leans on energy, from farming and transport to computing and waste collection. Physically, energy is conserved, but useful resources are not: each process turns some of it into waste heat. That is why management matters. Often simple changes cut bills without new technology, by trimming waste and matching supply to justified demand. Because power systems are priced for peak capacity rather than average use, smart grids aim to flatten demand so the two curves line up.
Financial markets reflect the industry's appetite for capital. Energy firms account for 4.6 percent of outstanding leveraged loans, up from 3.1 percent a decade earlier, and their bonds make up 15.7 percent of the 1.3-trillion-dollar junk bond market, against 4.3 percent before.
The costs extend beyond balance sheets. Burning coal, oil and gas for electricity emits carbon dioxide along with sulphur and nitrogen oxides, plus trace metals such as mercury and cadmium. Nuclear plants leave radioactive waste, and oil extraction brings spills. Regulation increasingly makes companies pay for this damage, and markets in carbon and pollution credits add further pressure. Many economies are pouring money into renewables to curb warming and dirty air.
Source: Energy industry
