Socio-economic analyses are used to assess how the objectives of energy policy are achieved in the most appropriate way. The socio-economic analysis depends on the assumptions used for the analysis.
For these analyses it will often be important, what is assumed about fuel prices. The assessment of trends in global oil prices will in some cases be crucial when assessing the profitability of wind, straw burning, or other renewable sources.
Guidance on Socio-Economic Analyses Danish Energy Agency’s Guide to the socio-economic analysis on energy consists of two parts. The first part deals with the actual method used for socio-economic analysis of projects in energy. The second part deals with the assumptions, i.e. the underlying data, including assumptions about fuel prices and emission factors.
On the
danish site you can find instructions with associated examples of calculations (files in danish).
Purpose of analyses
The objective of socio-economic analysis of projects is to improve the basis for a qualified social prioritization of scarce resources. A sensible social prioritization of resources across sectors with varying time horizons require that assessments are made based on consistent and transparent methods, while special issues and consequences are described as best as possible. The result will always be a balance of both economic and non-economic considerations, including social, ethical and others. It is important to be aware of the limitations of socio-economic analyses:
First, there is typically uncertainty about future developments in important factors such as energy prices, labor costs, etc. The importance of this can be illustrated through calculations of sensitivity.
Secondly, it may involve important social values e.g. on energy security, environmental and technological developments that are either not priced in a market where prices or inadequately reflect the full socio-economic values. Or there may be distribution politics, social and ethical considerations etc. which may be impossible to quantify.
On the danish site you can read more about the methodological issues (files in danish).