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.

Energy Grades

There are four energy grades used to measure energy characteristics: weight, volume, area, and state...