Energy Cost Reduction Generates Employments

Energy
Energy being the most fundamental, it is interesting to study what we do with energy
Assume a production job involves quantity E units of energy per unit product.There are
Two ways this energy expresses in the product ,one resulting in the internal energy state
of the product may be temperature as in the case of production of hot water from cold
water used in a process or a productThen the other is structural! energy.Third is the
"ravitational energy.

#onsider the bric$ wor$ above, as the wall height increases, its weight %mass& s well as
the 'gravitational energy! increases. (f the bric$ laying pattern is changed its structural or
'ordering) energy varies. (n this example ordering energy can be related to mechanical
strength, but in the case of a literary or software wor$,the ordering energy becomes
information!
Energy Relations in Value Addition
Thus if we start with the 'energy levels of mortar at Eb and of bric$s at Em ,and their
total as E*, %in the form of chemical energy& E, and now the built up wall has %chemical&
Energy E+ and an additional ordering energy) EO, then we can write ,due to the law of
conservation of energy that the total energy of the inputs should equal the total energy of
the ouputs
Eb,Em - E* - E+ , EO
The same principle applies whether we make shapes from clay,molten metal or
plastics.We can write value addition is nothing ut the ordering that is uilt into
The product from the unordered inputs.
!alue addition " E* . E+ - EO
Thus, almost all of the human civilsation is uilt on ordering processes,where we
shape material or information using appropriate media and appropriate energy ,which
could e human energy # laour$ or machine or capital form of energy, or usually,
oth using the fundamental energies #chemical,mechanical,etc$ of nature,availale to
their systems within.
/r if we set our energy measurements in such a way that E* - '0), then we get
. E+ - EO which tells that E+ units of External Energy is use up %or reduced, as
indicated by the negative sign& to give the product which is %internally or externally &
'ordered) .
(f the energy cost is C 1upees per unit, then the cost of production of a unit of product
is # E+ 1s.
2e can see that the #onversion #ost,or the cost of value addition! is the cost of the
energy consumed in giving the product.
3ut the use of new technology or new materials can wor$ either by lowering the cost
level of inputs %including substitution& or by reducing the energy required for
conversion, or both.

4ew production organi5ing methods %without materials change& can reduce the cost of
production as shown by blue s! curve.3ut a new Technology with a lower cost input
materials can reduce the cost drastically as shown by the green curve, thus emphasi5ing
the need for policies encouraging all round gfbc %greener, faster, better, cheaper&
technology creation in all production and service processes.
Sectorwise GDP Factor Cost of Energy
As the national "67 is made up of production and service processes, production process
such as agriculture and harvesting, incurs upto *08 of the total "67 or output costs as
energy costs. 2hile industrial processes such as mining, metallurgy etc uses a minimum
**98 of the "67 or, output costs %not prices, which will be mar$ed up& as energy costs,
while transportation uses about :;8 and service industry uses about +<8 of their
corresponding "67s. This is to say that agriculture uses *08, industry **98,
transportation :;8 and services about +<8 of their costs as energy costs.
As a gross approximation we can use an the Arrhenius! type of equation to represent the
'rate constant) for these agricultural,industrial,transport and service transactions.
!e Arr!enius E"uation
=or example assume + >nits of ?ortar and @ units of 3ric$s are required to follow a unit
of the wall. /bviously,this differs for other styles,and we write this for Aeader Btyle 2all
7roduction 1ate - $h)C?D
+
C3D
@
Thus $h is the proportionality constant lin$ing production rate and the ratios of
component units involved in a production.
Tailoring the Arrhenius equation in chemical sciences for our purpose of calculating the
rate constant '$h) of of economic transactionsEequivalently,production rate constant ,we
write
'$h) - Ae
.cE#P
2hich '$h) is the #onversion rate constant or transaction constant! for Aeader Btyle!
bric$ wor$ ,A is the 7re Exponent, where c is the threshold #ost per unit, ( is the
Type #onstant! specific to an industry or a method, and 7 is the 7rice reali5ation per
unit product.
Arbitrarily assuming A-9, and (-7 -* ,we can use the expression
'$h) - 9F exp
%.Tc&
2here Tc is the transaction cost. (f our economic operation involves Agriculture,Agri
(ndustrial 7rocessing,Transportation and Agriproduct retailing %as Bervice& we need to
2rite ,for an agriculture ,to industry, to mar$eting services involving transportation,we
can write,
'$A) - 9F exp
%.TcA&
2here A stands for agriculture and Tc as cost "67 of Agriculure
'$A() - 9F exp
%.Tc(&
2here A( stands for food 7rocessing (ndustry and Tc( for its #ost "67
'$At) - 9F exp
%.Tct&
2here At stands for agriproduct and food transport (ndustry and Tct for
its #ost "67
'$As) - 9F exp
%.TcB&
2here As stands for agriproduct and food retailing (ndustry and Tc( for
its #ost "67.
4ow the composite transaction can be represented as a product of all Transaction
#onstant $A , $A( etc.
Bo,multiplying all five equations and abbreviating product of Transaction #onstant $A ,
$A( etc. as $ ,we get
$ -G+9exp
%.TcA,Tc(,Tct,TcB&
2e need to calculate $ in an economy with *0,**9, :;,and +< as the percentages of the
"67 incurring costs of energy ,respectively in agricultural,(ndustrial, Transportation and
Bervicing %retailing eg& which is typical of (ndia.
Energy #ost from "67 #ost
Energy cost fraction of %*& TcA - 0.*x, %+& Tc( - *.*9x, %H& Tct- 0.:;x,
%;& TcB - 0.+@x,where x is the sectoral "67 on #ost basis. Bo ,
$ - G+9exp
%.+.+:x&
#alculation and analysis show that 'one unit) cost reduction from H.9 cost units to +.9
units %ie by +@8,& in an operation involving all these sectoral activities, increases the
economic activity %transactions& by <:: 8 III
And reduction of 'one unit) of cost from +.9 units to *.9 t units or ;08,the economic
activity increases by <.:@ times %ie <:@ 8& I
Bimilarly the two cost units reduction from H.9 units to *.9 units %9:8 reduction&
increases the economic activity again by about <900 8 I
These models are approximate ,since we assumed A-7-(-*, but they show that the
Energy #ost 1eduction is a "reat "rowth Enabler I
=igure shows how Energy #ost 1eduction %E#1& increases the economic activity
%transactions& hugely.
Energy Cost Reduction is #mperati$e
The best way to improve energy intensity in an economy is to reduce the energy cost,with
proper controls in the power sector. A *08 reduction of energy as fuel or power
cost,increases the transactions in the economy with a potential to create massive
employment.
Aigh #ost 3arriers in the ?ar$et #reates fewer transactions by the 'influential %who use
ladders& only and ,only few are benefited.
Jower #ost 3arriers to ?ar$et Entry brings in more players and more benefits to all I
And Energy #osts are significant barriers II