Karela Fry

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What is the real cost of energy?

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In an industrial society energy is required to produce anything from rice to information. In comparison, the amount of energy you use at home is probably small. How do you take into account all these diverse uses of energy, and the different rates that factories and individuals pay for it? One rough estimate would be to take the total energy use of a country and divide it by the GDP.

Here is a table that I drew up using publicly available data (another name for a Google search):

Country Energy Population GDP Cost ECP
  (KWh) (millions) (billion $) (KWh/$)  
Canada 17179 32.6 1279 0.44 1.47
USA 13338 298.6 133336 0.30 1.0
Australia 11126 20.7 749 0.31 1.03
Japan 8076 127.8 4363 0.24 0.80
France 7689 61.3 2919 0.21 0.70
Germany 7030 82.4 2266 0.20 0.67
UK 6206 60.6 2430 0.15 0.50
Russia 5642 142.5 990 0.81 2.70
Italy 5644 58.9 1863 0.18 0.60
India 631 1110 951 0.74 2.47

All the figures are for the year 2006. This is the most recent year for which I found estimates of energy usage in a year per country. The column for energy gives the total per capita energy usage in 2006 for each country in Kilowatt-hours (KWh). This has to be multiplied by the population to get a country’s total energy usage.

The relative cost of energy in different countries can be captured in a number that one can name the energy cost parity (ECP). This is the ratio of the energy cost in any country to that in the USA. The larger the ECP the more energy you can buy for an amount of money that would get you one KWh in the USA. In an industrialized country, this would mean that the cost of leading the same standard of life as in the USA would be cheaper.

It turns out that energy is cheapest in Russia. The cost of living is therefore the lowest in Russia, as captured in is ECP of 2.7. India is next with an ECP of 2.47, which means that 1 USD can buy you 740 watt-hours of energy. UK has the lowest ECP of 0.5; in Britain you can buy only 150 watt-hours of energy with 1 USD.

It seems likely that the apparent low cost of energy in India is a mirage. The cost is hidden in the subsidies that the government gives for energy use. In the long term such hidden subsidies to shore up the purchasing power of the rupee, unless balanced by real production, would lead to inflation.

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  1. […] is used to generate electricity, then it adds a negligible fraction to the cost of energy, which is almost Rs 40 per KWh in India. The Kudankulam power plant will produce energy at the cost of Rs. 5,16,438 per KWh. Share […]

  2. […] petrol price hike, the rupee continued to fall. Strengthening the rupee will require reducing the debt burden of the government, a significant part of which is due to a crisis in energy production. It seems that the prime […]


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