Energy efficiency vs energy intensity

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It is easy to confuse energy efficiency and energy intensity. Energy efficiency as we describe it above is a bottom-up view applied to individual activities. We describe energy intensity as a top-down or aggregated look at energy use in an economy. For consistency and clarity, the rest of this chapter will use the term efficiency for specific activities and intensity for aggregated energy use. However, the relationship between the two is far more complex and controversial than a simple aggregation.

One measure in common usage to define energy intensity is primary energy supply divided by GDP (E/GDP). For most OECD countries, this is between 7 and 14 mega-joules per US dollar (MJ/US$) with the US and Sweden in the upper part of this range and Japan in the lower range (Azar and Dowlatabadi, 1998). However, energy intensity is not simply the inverse of energy efficiency. Energy intensity is also affected by a nation's climate, heating and cooling requirements, amount of indoor space, lifestyles, population density, economic structure (industrial versus service-based, strong dependence on primary materials or not, etc.), and various other factors. For example, Norway has a very high ratio of energy use to output in manufacturing because a high concentration of its industrial sector is in energy-

intensive processes (paper/pulp, refining, non-ferrous metals, and ferroalloys) (Schipper et al., 1998). Pure energy efficiency is estimated to account for between one-third and two-thirds of energy intensity, with the other factors making up the rest.

These difficulties in comparing energy intensities between countries (when defined as E/GDP) has led some leading commentators to call for this measure not to be used at all. This objection in using E/GDP is both for spatial and temporal comparisons but also in aggregation from technology-specific energy efficiencies to a measure of national or international energy efficiency. It is complex and difficult to equate particular technology-specific measures of energy efficiency with the aggregated measure of energy intensity because intensities reflect behavior, choice, capacity or system utilization and other factors besides just engineering considerations.

Researchers at the International Energy Agency (IEA) suggest that the ratio of energy use to GDP is not the measure upon which we should be focusing. They explain, "since the denominator represents many diverse activities, the ratio cannot really measure efficiency. Since the numerator aggregates many fuels and stirs electricity into the mix as well, even the notion of 'energy' is confused. Moreover, the mix of activities generally varies from country to country and over time. Since the energy intensities of these activities vary widely, variations in the mix of activities can cause significant variations in the ratio of energy to GDP over time, or explain enormous differences among countries. Since efficiencies refer either to specific physical processes or to specific economic activities, it is hard to take seriously an aggregate ratio of energy use to GDP as an indicator of either energy efficiency or economic efficiency. Thus we are left with a quantity that does not tell us much more than how much energy is used relative to GDP. In response we have decided to disaggregate energy uses and activities and to calculate intensities where numerators and denominators match as closely as possible." (Schipper et al., 1998). This has been the main focus of the IEA's "Energy Indicators" effort.

The IEA has thus defined its own version of "energy intensity" which differs from the general use of the term (E/GDP). They explain: "measuring 'efficiency' is far more difficult than it seems to be. This is because we rarely observe the physical quantities that define an 'efficiency' in the engineering sense. And we rarely measure or estimate the economic inputs and outputs that define economic efficiency. To avoid this confusion we introduced energy intensities, defined as energy use per unit of activity or output for a large number of economic and human activities. In economics, intensities are often used to measure how much of one (of many) resources is used to produce a given output. These intensities can be aggregated under certain conditions, but should not be confused with the ratio of energy use to GDP, which unfortunately is still used widely to measure 'efficiency'."(Schipper et al., 1998).

Another confounding issue is that how GDP is measured differs across countries, compromising the accuracy of international comparisons. For example, developing countries are often judged energy inefficient on the basis of their energy intensity because the GDP figures used are based on their relatively weak market exchange rates. But if purchasing power parity (PPP) exchange rates are used instead, the energy intensity of developing countries is similar to that of industrialized nations (Azar and Dowlatabadi, 1998; WEC/IIASA, 1995).

Although the measure of E/GDP is an imperfect measure of energy intensity, and aggregation of individual energy efficiencies is fraught with difficulties, the rest of this chapter will discuss energy intensity for aggregated energy use and energy efficiency for individual technologies and activities. This is for two reasons. Firstly, this chapter examines the role of energy efficiency in determining how much carbon-free power is required for an abatement policy to respond to anthropogenic global climate change. For this purpose, a molecule of carbon is the same whether emitted from a steel mill or a residential Stirling engine in either Arizona or Angola, and thus some measure of aggregation is needed for comparison, prediction and discussion. Secondly, the use of E/GDP, with its limitations clearly understood, allows flexibility to expand on the importance of lifestyles, economic factors, political decisions, and social processes in determining how energy is used and how vital the evolution of these interacting processes will be in shaping future energy consumption and hence emissions of greenhouse gases.

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