Started running a quick and dirty Model re: linked document and came up hard against a question to which I can't answer (Read: AT goes, "D'oh?"
The Question: Is energy a good or a service?
This may seem a silly question ...
OK, it IS a silly question ...
but to really get down & boogie, analytically speaking, I really need an answer.
Help?
Help
To what extent is "energy" ever supplied? Is it not rather goods that are capable of producing energy in certain circumstances?
However, usable energy (also known as Free Energy in Thermodynamics) is destroyed or (hopefully) consumed, and is not conserved but degraded. That's the Second Law of Thermodynamics. And in this sense yes, energy in usable form (often using a low-entropy form of matter as carrier) is produced. Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
Examples of goods: (Thermodynamic Free) Energy, (neg)-Entropy, Space/Size, (amount of) Matter, electrical charge/current, magnetic moment (i.e., strength of a magnet).
Examples of services: Temperature, Pressure, surface/linear Tension, electrical Voltage, magnetic Field.
Hah. Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
Cost of goods and service by resource type are bundled in consumer (business or residential) price(s) as if to reflect discount scale economies enjoyed by the utility provider.
Electricity is a "energy" commodity (goods). The amount and quality (e.g. timed demand, generator fuel) consumed are subject to variable rates of the utility's cost structure. Consumer rents equipment to terminate delivery (service).
Gas and heating oil are "energy" commodities (goods). The amount and quality (e.g. grade) consumed are subject to variable rates of the utility's cost structure. Consumer rents equipment terminating delivery (NG service); consumer owns equipment terminating delivery (oil, propane, wood, other service). Diversity is the key to economic and political evolution.
I see the argument going either way or, even, both.
(Oh, please not both!)
"Energy" is both. The evidence is all around you. You have only to examine your monthly utility bills (to "discover" the values of variables of the supplier's model). To populate a database of rates, then deduce cost structure of one or more suppliers given prevailing commodity prices (e.g. spot, futures), requires some greater investigatory um rigor. Diversity is the key to economic and political evolution.
For the 'need to know,' see above.
Re: "why doing it" ...
I could bullshit up an answer but the plain unvarnished truth is: I enjoy building Models & I got curious. Never done anything like this before and ... what the heck? Why not?
The easiest way to explain it is ...
A good is a noun. A service is a verb.
I said downthread that a good is extensive, a service is intensive.
Interesting analogies. Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
And from that ... offhand, or superficially, it looks like Power (the entirety of it) can be Modeled using Categorical Logic and Set Theory -- if one allows Triples in the latter. Bringing up the intriguing notion of using (stealing) the idea of functor from Category Mathematics as a way to handle Power-as-Supply and Power-as-Demand as across Time.
Of course, there are systems of Temporal Logic running around based on Modal Logic. I'm not convinced, yet, they are all that useful in a dynamic environment.
For most purposes I think you'd model energy (in its manifestations as resource input and electricity) as a good.
I'm personally opposed to treating natural resources as goods rather than as capital (in which capacity I'd guess they're neither goods nor services), but maybe that is a different discussion.
Due to lack of time and resources, it's doubtful the thing is going to be worth spit.
Even so, some energy vectors can be traded as commodities, like gasoline or electricity. Vencit omnia veritas.
Even so, some energy vectors can be traded as commodities, like gasoline or electricity
Indeed.
And IMHO the future of the global financial system (at least for cross-border transactions - domestic trade is another issue) lies in the commoditisation - by the simple expedient of creating Units redeemable in energy - of such energy vectors, and thence to their "monetisation" through an International Energy Clearing Union.
Certainly the concept of a global "Petro" energy standard and the global monetisation of natural gas went down really well in Iran last week.
If I stay snowed in up here in Scotland, I might even complete that article for the Oil Drum you suggested I write ;-) "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Btw, do you know Andrew Mckillop and his latest ideas [pdf] ? Vencit omnia veritas.
But I don't think centralised institutions and architectures are optimal. McKillop seems to be looking at a centralised Keynesian International Clearing Union/ Bancor approach.
When I talk about "frameworks" I don't mean "Organisations" or "Institutions" but simply agreements or protocols with cross border application.
I think we need local solutions linking up regionally and globally to form a global network from the bottom up, rather than any more global organisations funding things "top down".
But it's really about "whatever works", isn't it? "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Energy at its genesis is neither a commodity or a service, it is the ability ...
I disagree. This language dissembles the tangible constituents (mechanical processes, equipment such as transmission lines, production inputs such as "natural" commodities and human labor) --"its genesis"-- that yield benefits, both tangible and intangible such as "ability."
"Vector" analyses are merely discursions about mathematical relationship(s) among terms of production, purportedly of economic interest to the owner of the means of production.
To ignore tangible goods and services that constitute "energy" benefits is perforce magical thinking about "energy" production of a calibre represented by political assumptions of this EU policy paper. That is the ownership interests in natural resources of peoples who are not EU beneficiaries of "its genesis." You note obliquely EU dependencies in North Africa to obtain EU energy production goals:
The major goal put forward by the Commission is the Trans-Sahara Gas Pipeline, that it pretends to secure with bilateral agreements using instruments such as European Neighbourhood and Partnership Instrument, the European Development Fund and the European Investment Bank.
What is the purpose of deflecting ownership interest in and information about EU-located energy production or conservation for that matter? Diversity is the key to economic and political evolution.
Fuels used to provide concentrated energy (it is, of course, the concentration being purchased, since the energy itself is conserved) are goods.
Electricity is a service, of course ... sometimes its a service produced from a mix of fuels and capital goods. sometimes its a service produced primarily from capital goods harvesting a sustainable renewable source of concentrated energy.
Because of the dominant important of transmission infrastructure, natural gas is a good that acts very much like a service.
Because of the dominance of fossil fuels as concentrated energy sources, we treat energy primarily as a good, but if we shift to a sustainable, renewable Energy Economy (and the alternative is, of course, economic collapse), we must also shift to treating energy primarily as a service. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
Yes, that is it. Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
