Revised 26 September 2021

All processes aimed at producing high-grade energy in the form of fuel, goods, and services involve the use of high-grade energy. In previous sections, low-grade energy of the sun was shown to be upgraded by the interaction of this incoming flow of low-grade energy with feedback loops of high-grade energy. In tapping high-grade energy resources such as oil, coal, and gas, high-grade energy in the form of machinery, fuel for machinery, and the expertise and labour of people are used. For each unit of energy extracted from the ground, there is an energy cost involved in doing so. Whether or not the extraction of high-grade energy resources results in net energy depends upon the energy cost of extraction. In some cases, the production of high-grade energy involves heavy subsidies of high-grade energy. An example of this is the oil subsidy in agriculture to produce the energy content in food provided by larger crops as shown in Figure 17. 

Figure 17: Oil subsidy in agriculture (Odum, 1976, p87)

Beyond a certain level of energy inputs, further energy inputs in the form of fertilisers, pesticides, and machinery result in diminishing returns in crop yields. Because the cost of energy has been small compared to the price received for the crop yield, it has been profitable to continue using cheap energy, even though this is an inefficient way of doing so. A number of farmers are aware of this energy-crop yield relationship and now use less energy in their farming by using permaculture methods. These farmers are able to farm profitably by doing so more energy efficiently. 

It is of urgent priority to determine whether current or alternative renewable energy sources generate net energy by taking into account all hidden energy subsidies. Price alone cannot determine whether an energy source can produce net energy. Figure 18 shows an example of a dispersed oil reserve near the end of its life where the energy costs of extracting and refining the oil are high. Energy used in the process still results in a net outflow of high-grade energy. 

Figure 18: Example of oil reserve near the end of its life (Odum, 1976, p82)

Figure 19 shows an example of a very dispersed oil reserve which is no longer able to produce net energy due to very high energy costs of extraction and refining. To maintain the process, another source of high-grade energy is required to make up for the deficit. The oil reserve can no longer sustain its own extraction and refining. 

Figure 19: Example of oil reserve which cannot sustain its own extraction and refining (Odum, 1976, p83)