Research Article: Industry and Business, Energy as a Factor of Production In

The production of goods and services requires energy as an input, which is called a factor of production. Energy sources vary in their effectiveness as a factor of production, depending on their energy characteristics. The energy characteristics are measured in energy grades, which indicate the levels of usefulness of any given energy input. Low-grade energy resources are less useful to an economy than high-grade resources, because any given process will be able to produce more economic value from a high-grade energy resource than from a low-grade energy resource. For example, it is easier to fly a passenger jet aircraft using jet fuel rather than coal because jet fuel has more suitable energy characteristics.

There are four energy grades used to measure energy characteristics: weight, volume, area, and state. The weight grade is British thermal units (Btus) per pound of the energy resource. For example, coal has 10,000 Btus per...
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