Exergy, an International Journal 2 (2002) 218–220www.exergyonline.com

Viewpoint article

Exergy and economics: Is exergy profitable?✩

Marc A. Rosen, Associate Editor

School of Manufacturing Engineering, University of Ontario Institute of Technology, 2000 Simcoe Street North, Oshawa, ON, Canada, L1H 7L7

Abstract

The author explains his views that the understanding we have developed of the relations between exergy and economics—and the toolsthat have correspondingly been created—are great successes, but that these areas need to be further developed and somewhat simplified topermit industry to apply them more widely and beneficially. 2002 Éditions scientifiques et médicales Elsevier SAS. All rights reserved.

1. Introduction

Energy economics is a broad field. Much work has beendone that combines energy and economics, and today wecommonly accept terms like energy costs, energy prices, etc.

But the costs really bear no relation, in general, to theenergy content of a commodity. This is because energyis generally not of value. However, exergy is, and basingeconomics—including such quantities as costs and prices—on exergy makes sense.

Work linking exergy and economics stems from researchcarried out several decades ago that tied entropy to eco-nomics. One of the pioneers in this area was NicholasGeorgescu-Roegen [1], whose 1971 book “The Entropy Lawand the Economic Process” is cited continually and has moti-vated many research projects. More recently, Jeremy Camp-bell wrote, “Entropy has always tended to break out of itshome territory of physics and mathematics and be taken upby economists. . . and other speculative thinkers” [2]. Incommenting on the present revolutionary changes in thermo-dynamics associated with the emergence of exergy methods,Adrian Bejan, the honourary editor of this journal, writesthat the emphasis of such work is now “not only in the main-stream of engineering but also in. . . economics” [3].

Many researchers have remarked on the relation betweenexergy and economics. For example, Antonio Valero haswritten about present energy and exergy costs in society[4] and, with George Tsatsaronis, has addressed the inter-

✩ This is the seventh in a series of viewpoint articles by the author onexergy and related matters.

E-mail address: marc.rosen@uoit.ca (M.A. Rosen).

face where thermodynamics (including exergy) meets eco-nomics [5].

I contend that more work is needed on exergy and its linksto economics, and on the useful and powerful tools that canbe derived from those links. In addition, I feel that simplifiedmethods that are more suitable to industry than cutting-edgeresearchers are also needed. Such efforts cannot only helpindustry in design activities, but benefit society too.

2. Exergy and value

Commodities with high exergy can do things for us, likehelp manufacture products and provide services. It is, in fact,this very characteristic of exergy that we value. Intuitively,therefore, it is logical to suppose that exergy would becorrelated somehow to economics.

For a process or system, one can consequently arguethat costs are better distributed among outputs when costaccounting is based on exergy because exergy often is aconsistent measure of economic value. That is, a largequantity of exergy is often associated with a valuablecommodity. Energy, on the other hand, is only sometimesa consistent measure of economic value.

Another relation between exergy and economic valuestems from the observation that exergy losses for a systemappear to correlate in an inverse manner with capital costs.I found this result by examining a utility-scale coal-firedelectrical generating station [6]. Some of the preliminaryconclusions that were drawn from this work are as follows:

• A significant parameter appears to be the ratio ofthermodynamic loss rate to capital cost.

1164-0235/02/$ – see front matter 2002 Éditions scientifiques et médicales Elsevier SAS. All rights reserved.PII: S1164-0235(02 )00086-9

M.A. Rosen / Exergy, an International Journal 2 (2002) 218–220 219

• A systematic correlation appears to exist between ex-ergy loss rate and capital cost, but not between energyloss rate and capital cost. This finding is based on the ob-servation that the variation in thermodynamic-loss-rate-to-capital-cost ratio values for different devices is largewhen based on energy loss, and small when based onexergy loss.

• Devices in modern coal-fired electrical generating sta-tions appear to conform approximately to a particularvalue of the thermodynamic-loss-rate-to-capital-cost ra-tio (based on exergy loss), which reflects the “appropri-ate” trade-off between exergy losses and capital coststhat is practiced in successful plant designs.

The existence of such correlations likely implies that design-ers knowingly or unknowingly incorporate the suggestionsthat emanate from considering the ties between economicsand exergy into process designs indirectly.

3. Illustration

To illustrate how exergy correlates with economic value(and, conversely, how energy does not), consider cogenera-tion, or combined heat and power (CHP). If for that processone attributes costs, or estimates prices, based on energy,an absurd situation ensues. The product electricity is easilysold, as it is ridiculously underpriced, while there is no in-terest in purchasing product heat, as it is terribly overpriced.Yet when prices for these commodities are based on exergy,prices that are relatively realistic fall out.

I have even heard rumors of cogeneration plants thatin the past went bankrupt, in part because they pricedtheir products based on energy. Although I have not beenable to verify this rumor, it nevertheless serves as a usefulillustration of the fact that some energy forms like electricityare more valuable than other forms like heat, and that exergyreflects that usefulness or value. Thus exergy provides alogical measure for attributing costs or establishing prices.

4. Extended illustration

By addingcold, or cooling capacity, as a third product,a cogeneration plant can be extended to what is commonlyreferred to as atrigeneration plant. Then, the situationin the original illustration is compounded, as it becomesnecessary to attribute costs and establish prices for thecold, a commodity that does not contain energy in theconventional sense. This creates a real problem and leavesmany asking how to logically price the three products.

Again, the answer lies with exergy, as the exergy of eachof the three products provides a sound basis for costing andpricing.

5. Assessment methods that combine exergy andeconomics

Many methods for performing economic analyses basedon exergy have been developed and applied, with varyingdegrees of success [7–10]. These methods are referred to bysuch names as

• thermoeconomics,• second-law costing, and• exergoeconomics.

A common feature of these techniques is that they recog-nize that exergy, not energy, is the commodity of value ina system, and assign costs and/or prices to exergy-relatedvariables. Consequently, these techniques usually help de-termine the appropriate allocation of economic resources soas to optimize the design and operation of a system. This isaccomplished by maximizing the economic feasibility andprofitability of a system, by determining actual costs of prod-ucts and their appropriate prices.

Long-time exergy-economics researcher George Tsatsa-ronis [7] identifies four main types of exergy-economicmethodologies, depending on which of the following formsthe basis of the technique:

(i) exergy-economic cost accounting,(ii) exergy-economic calculus analysis,(iii) exergy-economic similarity number, and(iv) product/cost efficiency diagrams. Several detailed re-

views of these techniques, including comparisons andcritiques, are available, e.g., [7,8].

These techniques are quite sophisticated and powerful. Yetthey often lack generality and are found difficult to apply byindustry.

Applications of assessment methods that combine exergyand economics have nonetheless become more numerousin recent years. In the preface to the 1995 edition of hisbook on exergy methods [11], Tadeusz Kotas observes thatsince the early 1970s, “there has been a steady growth inthe interest in exergy analysis and thermoeconomics (or. . .

exergoeconomics)”.Some of the many applications of these methods have

been reported in this journal. Some examples:

• Many conventional engineering devices have been ex-amined like gas turbines [12] and heat exchangers [13].

• Enrico Sciubba proposes going beyond thermoeco-nomics to analyze and design better thermal systems [14].

6. Design and industry

An understanding of exergy is critical for design. Yetmost design activities are based on economics, in addition

220 M.A. Rosen / Exergy, an International Journal 2 (2002) 218–220

to technical factors. It follows, therefore, that integratedmethods for exergy and economics would be central todesign, and recent attempts have been made to move in thisdirection. For example, prominent exergy researchers andeducators Adrian Bejan, George Tsatsaronis and MichaelMoran have written a text on the design and optimizationof thermal systems [15]. However, examples of applicationsin industry—in design or other activities—of exergy andeconomics relations and tools remain relatively scarce.

Thus, I believe that exergy and economics linkages andmethods must be better understood and made more widelyapplicable if industry’s use of these tools, especially indesign, is to increase.

7. Closure

Much has been done on exergy and economics, bothto improve understanding of the relations between themand to develop better tools—especially for design. But Inonetheless believe that much more work is needed. Twomain areas I feel require investigation follow:

• extensions of the present activities where they have beensuccessful, so as to permit further developments in toolsand methods, and

• simplifications of the explanations and tools. At present,these are often so complex that industry does not want touse the knowledge and tools, and cannot be convinced ofthe benefits of the results because they are seen as quiteindecipherable.

Such developments will, I am confident, allow us to profitsignificantly from exergy methods, in economic terms and inmany other ways.

Acknowledgements

Financial support was provided by the Natural Sciencesand Engineering Research Council of Canada and is greatlyappreciated.

References

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[2] J. Campbell, Grammatical Man: Information, Entropy, Language andLife, Simon and Schuster, New York, 1982, p. 51.

[3] A. Bejan, New century, new methods, Exergy Internat. J. 1 (2001) 2.[4] A. Valero, On the energy costs of present day society, in: R.J. Krane

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[11] T.J. Kotas, The Exergy Method of Thermal Plant Analysis, ReprintEdition, Krieger, Malabar, FL, 1995.

[12] Y.-H. Kwon, H.-Y. Kwak, S.-D. Oh, Exergoeconomic analysis of gasturbine cogeneration systems, Exergy Internat. J. 1 (2001) 31–40.

[13] A. Can, E. Buyruk, D. Eryener, Exergoeconomic analysis of condensertype heat exchangers, Exergy Internat. J. 2 (2002) 113–118.

[14] E. Sciubba, Beyond thermoeconomics? The concept of extendedexergy accounting and its applications to the analysis and design ofthermal systems, Exergy Internat. J. 1 (2001) 68–84.

[15] A. Bejan, G. Tsatsaronis, M. Moran, Thermal Design and Optimiza-tion, Wiley, New York, 1996.