By Mike Pepler, Ashden UK Awards Manager

This is the second in a two-part blog that looks at the changing relationship between energy, money and food.

In my previous blog I described how until we started using fossil fuels, the amount of work that could be done was largely limited by the availability of food (ie energy). Thus the rate at which economic activity – and its environmental impact – could grow was also constrained.

Improvements in agriculture increased the yield of food, supporting a growing population and allowing the proportion of the population working in agriculture to be reduced, but it was with the industrial revolution that economic growth really took off…

With the use of coal, then oil and gas, many changes were possible. A coal miner working by hand could produce perhaps 9 tonnes of coal a day, or 75,000 kWh, and when this coal was burned to drive machinery, the equivalent work of hundreds of people could be performed. As tractors became common, the land previously used to feed draught animals could now be used for food or other purposes, and chemical fertilisers based on gas and oil boosted food production further still. These are just a few examples of the changes over the past 200 years that have resulted in massive economic growth and the society we have today.

But what happened next?

First, a quick diversion into money and debt. If money is lent at interest, as it is by banks, investors, and so on, then the person, business or government borrowing the money ends up paying back more than they borrowed in the first place. In order for this to be possible, they need to increase their earnings, grow their business or gain higher tax revenues. So in a sense, when someone borrows money at interest, they are making use of expected future growth in income to access extra money today. This is why economic growth is so important for our current financial system: without it, people can’t pay their debts back. When enough of them can’t pay, banks start going bust.

But let’s get back to energy: since 2005, global supplies of oil have grown very little, while demand from developing countries has grown significantly. As a result, fuel and food prices rose significantly through the middle of the last decade, leading to mortgage defaults in the USA and then elsewhere, and from there to bank failures, bailouts and the ‘great recession’.

Although oil prices crashed in late 2008, in the wake of the financial crisis, they have since pushed back up towards record highs, and extreme weather events are keeping food prices high too. So the world energy supply is not going to be growing much in the coming years, if at all, and bearing in mind that energy is required for ‘work’ to be performed, this doesn’t bode well for economic growth.

Part of the problem is that traditionally economists have viewed energy as ‘just another resource’, with the possibility of substituting one type for another.

But while substituting chicken for beef, or vegetables for chicken, as prices rise might make sense, you can’t just decide you’ll put natural gas in your car because petrol is getting expensive, much less run it from solar panels or a wind turbine. Substitution between energy types IS possible, but it usually requires significant capital investment in products and infrastructure, and can be a lengthy process.

So where does this leave us?

First, just because we’re going to have less energy per person in future than we do now doesn’t mean we’re heading back to the Stone Age. We have significant resources in the scientific and technological achievements of the last few centuries, and we have much better access to renewable sources of energy than we used to.

But the reality is that we are going to have to make do with less energy, albeit if we work hard to improve efficiency, then the changes we see in practice may not be as severe as they could be. In fact, the concept of 'efficiency’ may need to change a bit – at present people often think the cheapest way of doing something is most efficient, but in future the efficient use of energy and resources will be more important.

In fact, perhaps it’s not such a crazy idea to draw some lessons from what we had a few hundred years ago, when a much closer relationship existed between money and energy, so that the most energy-efficient way of doing something also becomes  the cheapest way of doing it.

Maybe the kWh should be the next big currency, rather than the pound, euro or dollar?!