Here are some comments about the relationship of net energy to the economics of energy production. I will use a specific example of two fossil fuel reservoirs with different values of EROEI which I assume to be constant througout the lifetime of the reservoir. This assumption of constant EROEI is not realistic, but it will help to illustrate a conceptual point about the economics of energy production. Reservoir A has EROEI=20 and reservoir B has EROEI=2. Reservoir B has a total energy content which is 1.9 times greater than reservoir A. The reason for this peculiar choice of relative size is that it insures that both reservoirs will deliver the same amount of useful or net energy over their lifetime.
I will further assume that both reservoirs are very large and will not be depleted for many decades into the future. In our typical short-sighted human way we choose not to worry about what will happen when the reservoirs become depleted and simply concentrate on trying to maximize economic output in the short term. Which reservoir is economically superior and by what margin?
Even though reservoir B contains the same amount of net energy as reservoir A we have a sense that it is econmically inferior because we will have to work harder to produce the same amount of useful energy, so that the energy obtained is more expensive. The question is whether this excess expense can be quantified in terms of the energy balance alone.
We might try using the input energy required to produce a given amount of useful or net energy output as a measure of cost. For reservoir A the input of 1 unit of energy produces 19 units of net energy. For reservoir B we must input 19 units of energy in order produce 19 units of net energy. Therefore we might be tempted to say that energy from reservoir B is 19 times more expensive or, conversely, that reservoir A is 19 time more efficient in its use of input energy. The factor of 19 is proportional to EROEI-1 which I call NEROEI since it is the ratio of net energy output to energy input.
However, we must be cautious about accepting NEROEI as a measure of the economic efficiency of energy production. Properly speaking the production of energy has no energy "cost". This somewhat surprising statment can be supported by considering the production of some resource other than energy. Suppose that I wish to open a new platinum mine that will produce X tonnes of pure platinum every year. Extracting a tonne of platinum requires a lot energy. This energy must come from one of two places: Either some energy producer must dedicated extra production resources to extracting and delivering this energy, or some other economic process must give up energy. In either case the overall economy incurs a cost as a result of delivering this energy to my platinum mine.
However, if I intiate a new energy producing enterprise which has a positive energy balance (EROEI>1) then every bit of energy which I consume I reproduce, plus some extra. Therefore no energy producer is required to provide extra output. No other economic process has to sacrifice energy; On the contrary, since I am a producer of net energy some other economic process can consume the extra energy which I provide. Naturally one must subtract the input energy from the gross output energy to calculate the net benefit of energy production, but the "energy cost of producing energy" is an oxymoron.
On the other hand, although as a producer of net energy I do not take energy away from other economic processes, I do take away other resources. Producing energy requires labor and capital equipment (which may at least partly be regarded as embbeded labor). Some energy production processes may consume fresh water (e.g. oil shale production, water cooled CSP in the desert, etc). The production of biofuels may remove farmland from the production of food. And so forth. The opportunity cost of all of the finite production resources that are diverted from other economic processes into energy production is the real cost of producing energy.
One can define the cost efficiency of energy production as the ratio of net energy (gross ouptut - input) divided by the opportunity cost of the production resources that are diverted from other economic processes. In the case of indiviual resources one can define the resource efficiency of net energy production as the net energy divided by the quantity of resource diverted (e.g. hours of labor, cubic meters of water, hectares of farm land etc.). If one assumes that the opportunity cost of the diverted resources is always proportional to the input energy then one can use NEROEI as a proxy for the cost efficiency of energy production. But it is only a proxy. The assumption of universal constant of proportionality between input energy and total resource cost is almost certainly incorrect. The resource efficiency of energy production is a more fundamental economic conception than NEROEI. For example if water supply issues become sufficiently critical, then we may decide to convert some fraction of our thermal power plants to air cooling even though lower NEROEI results. In this case we would be trading off water use efficiency against some some other resource efficiency.
I could say more on this subject (obviously I have wasted too much time thinking about it.), but I suspect that anyone who started to read this post already dozed off several paragraphs ago, so I will end my comments here.