Introduction:

Energy economics studies energy resources and energy commodities and includes forces motivating firms and consumers to supply, convert, transport, use energy resources, and to dispose of residuals; market structures and regulatory structures; distributional and environmental consequences; economically efficient use. It recognizes 1) energy is neither created nor destroyed but can be converted among forms; 2) energy comes from the physical environment and ultimately returns there. Humans harness energy conversion processes to provide energy services. Energy demand is derived from preferences for energy services and depends on the properties of conversion technologies and costs. Energy commodities are economic substitutes. Energy resources are depletable or renewable and storable or non-storable. Human energy use is dominantly depletable resources, particularly fossil fuels. Market forces may guide a transition back to renewable resources. Inter-temporal optimal depletable resource extraction paths include an opportunity cost or rent. World oil prices remain above pre-1973 levels and remain volatile as a result of OPEC market power. Oil supply disruptions of the 1970s led to economic harms. Environmental damages from energy use include climate change from greenhouse gases, primarily carbon dioxide. Environmental costs not incorporated into energy prices (externalities) lead to overuse of energy and motivate policy interventions.

The need for Energy Economics:

1] In India, For power generation coal is the most-used energy source. Why??

The answer is coal is the cheapest source of energy. The need for economics is here. Suppose we are using one energy resource, it should be economically viable. The energy economics is important to decide energy resources to use in day-to-day life.

2]If almost all renewable technologies are discovered by scientists in the 19th century, then why in the 21st century we are not using all renewable technologies for all purposes. Again here is the great importance of energy economics. All renewable technologies were not affordable to every country or every citizen so we moved to cheaper sources like coal & gas.

Ref: https://web.stanford.edu/~jsweeney/paper/Energy%20Economics.PDF