EN21 Final Energy Consumption Intensity
Assessment made on 01 Apr 2007
ClassificationEnergy (Primary theme)
DPSIR: Driving force
- ENER 021
Policy issue: How rapidly is energy efficiency increasing?
Historically, economic growth has driven energy consumption in the end-use sectors of transport, industry and services, while household's final energy consumption is mainly influenced by household wealth, population size and the number of households. The indicator measures to what extent there is a decoupling between final energy consumption and these drivers, indicating one way of reducing the associated environmental pressures.
1.1 Trends across the EU-25
Over the period 1990 to 2004 the total gross domestic product (GDP) of the EU-25 grew at an annual average rate of 2.1 % and final energy consumption by 0.8 %. This led to a decrease in final energy consumption intensity at an average annual rate of -1.2 %. However, this trend has slowed in recent years with final energy intensity actually increasing by 1.5 % from 2002 to 2003, and only showing a small decrease between 2003 and2004. Improvements in final energy intensity are, in general terms, influenced both by structural changes of the economy such as a shift from industry towards services and within industry to less energy-intensive industries, and improvements in the technical efficiency of appliances or processes or better insulation. Decomposition analysis suggests that in the EU-15, structural changes in economy contributed significantly to the decrease in overall energy intensity during the first part of the 1990s. This has dropped with energy efficiency becoming responsible for a higher share of intensity improvements. However, a slow-down in energy efficiency improvements from the late 1990s onwards has led to a similar slowing in the rate of decline of final energy intensity (Enerdata et al, 2003; ADEME, 2005).
The drivers and the pace of final energy intensity improvement are significantly different between the new Member States and the pre-2004 EU-15 (-3.9 % and -0.9 % average annual change, respectively, over the period 1990 to 2004). In the EU-15 during the early 1990s, a combination of low growth in GDP, continued low fossil fuel prices (see EN31) and a general low priority for energy saving in most Member States contributed to a slowing down of the reduction in final energy consumption intensity. During this period much of the reduction came from the aforementioned structural changes in the economy, particularly a shift towards services1, with few proactive energy efficiency efforts (see EN17). Since then energy-efficiency improvements became more important in reducing final energy intensity (ADEME, 2005). Final energy consumption intensity differs widely across countries. In the new Member States it is still around 1.3 times higher than in the EU-15, although there is a converging trend. The main factors leading to improvements in energy intensity of the New Member States were structural changes of the national economies and a rise in energy prices.
1.2 Sectoral trends
Examining trends in final energy consumption intensity by sector for the EU-25 indicates that both the industry and services sectors have seen substantial improvements in their energy intensity over the past decade. In contrast, the energy intensity of the household sector (final energy consumption of the household sector per capita) has actually worsened and the transport sector shows only a very limited decoupling of transport energy consumption from economic growth. Between 2003-4, all sectors showed a slight decrease in energy intensity after having increased in 2002-3.
The energy intensity of the industry sector fell steadily between 1990 and 1999 but has slowed down since. The average annual decrease over the period 1990-2004 was -1.8 % (with the average annual decrease since 1999 only -0.6 %), although industry final energy consumption declined far more slowly. Hence this improvement was mainly due to a rise in value added within the sector during the 1990s and almost stagnation since then, coupled to relatively static final energy consumption. In the EU-15 the improvement has been induced by a wide range of factors reflecting structural changes in specific countries - shifts towards high value added, but less energy intensive industries, changes in energy intensive industries - and some general improvement in the use of energy. For example, production of goods such as electronic equipment requires less energy per unit of value added than more traditional products such as cars (IEA, 2004), and the production of machinery or equipment needs 11 times less energy per unit of value added than the production of primary metals (ADEME, 2005). The analysis of energy intensity is complex and the decrease in energy intensity can only partly be explained by structural changes. It is also the result of improvements in energy efficiency, influenced by technological innovation. Recently published results indicate that most manufacturing industries (except textiles) experienced increasing energy efficiency between 1990 and 2002 in the EU-15, influenced by improved production processes and innovative technologies (ADEME, 2005). In the new Member States the economic restructuring of the early 1990s led to a substantial initial decline in both the energy consumption and output of heavy industry. Since 1995, industrial production has started to recover, while energy consumption continues in a downward trend, with the overall result that final energy intensity has reduced much more rapidly than in the EU-15. The largest shift to less energy intensive branches of industries between 1996 and 2001 was observed in Hungary and Slovakia (Lapillonne 2004).
The services, agriculture and other sector has a relatively low level of final energy consumption intensity. In the EU-25, energy intensity declined by 1.6% per year on average, largely due to a significant reduction between 1996 and 2000, although there was some fluctuation in energy intensity over this period. This was due to the value added of the sector growing at a faster average annual rate than final energy consumption, 2.4% compared with 0.8% respectively. The rate of reduction in intensity was over three times faster for the new Member States than for the EU-15, although the overall EU-25 trend is dominated by the EU-15. A wide range of drivers impact on services final energy intensity, although the impact of each is difficult to quantify. These include: improvements in energy efficiency, counteracted by an increased use of information and communication technology in offices; change in the average office or floor space per unit of added value, and changes in climatic conditions, and improvements in insulation. In addition, much of the energy consumption in the service sector is not directly related to the level of economic output as a large proportion is 'information based', in contrast to a physical increase in the output of cement, cars etc. It is rather dependent on the physical size of the sector (number of people employed, floor area of buildings) and can be considered as a fixed cost for much of the sector (which does not imply that there is no important reduction potential in e.g. reducing energy for space heating or electrical appliances). However, the sector's economic output is sensitive to economic growth cycles (following the overall economy's pattern of investment and divestment/disinvestment) and consumer spending. Fluctuations in energy intensity may therefore reflect the cyclical nature of the economy, and also year-on-year fluctuations in climatic conditions which can contribute significantly to energy intensity trends as they affect building requirements for space heating.
The final energy consumption intensity of the household sector increased slightly over the period 1990-2004 (by 0.9% on average per year), with average annual population growth of 0.3 % and final household energy consumption growing by 1.2 % per annum. As the indicator is sensitive to both changing population size and household size, it is measured per capita and not per household. The household sector's energy intensity is also linked closely with climatic conditions, as the major part of the energy is used for space heating2. Hence the rate of change in energy intensity varies greatly year on year due to fluctuations in final energy consumption (see EN16). Final energy consumption intensity improved in the EU-10 new Member States by an average of 0.6% per year between 1990 and 2004, compared to an average annual increase of 1.5 %. in the EU15. In general, the lack of improvement in energy intensity in the EU-15 is due to increasing living standards and lifestyle changes, leading to larger numbers of households, lower occupancy levels (more square metres of living space per person) and increased use of household appliances (air conditioning, refrigerators, freezers, TVs, etc.) as well as the rise of new small appliances. These have outweighed the improvements in the efficiency of large electrical appliances such as refrigerators and TVs etc, which were supported by the introduction of energy efficiency labels and standards (IEA, 2005). Building energy efficiency standards have also been tightened in recent years but because the rate of turnover in the housing stock is slow the effect of these improvements will be seen over the longer term. New policies such as the EU Directive (2002/91/EC) on the energy performance of buildings and the Directive (2005/32/EC) on the eco-design of products may go some way to improving the overall level of efficiency.
Decoupling of transport energy consumption from economic growth has almost not occurred - the average annual decrease in energy intensity remained small at 0.3%. This was due to the rapid growth in road transport, which led to a rapid increase in energy consumption despite some improvements in fuel efficiencies of cars. For example, the average fuel efficiency of a newcar in the EU has fallen by 12% between 1995 and 2004 (European Commission , 2006). Transport growth was influenced by various developments. In many regions growing settlement and urban sprawl resulted in longer distances, infrastructure improvements made transport cheaper and faster, and rising disposable incomes changed many people's lifestyle with more demands for travelling and private cars. Furthermore, the development of the internal market has resulted in increased freight transport as companies exploit the production cost advantages of different regions.
1.3 Sectoral projections
Transport consumed just under a third of final energy consumption in 2004 (see EN16) and is predicted to keep growing to 2010, at an average annual rate of about 1.4 %, according to the PRIMES energy model baseline projections (European Commission 2006). Nevertheless, projections predict important future reductions in transport energy intensity (-0.7% p.a. in 2000-2010, and improving further to around -1.7 % p.a. between 2020- 2030, largely due to reductions in fuel consumption by new cars and trucks as a result of the voluntary commitment of the European, Japanese and Korean car manufacturers on improved specific fuel efficiency of new passenger cars (see European Commission, 2006 for progress achieved so far). Industrial energy intensity is also expected to continue falling with the improvement driven by structural changes towards less energy intensive manufacturing processes but also by the exploitation of energy saving options (European Commission, 2004).
In the services, agriculture and other sector, final energy intensity is expected to improve over the next three decades, although energy consumption is expected to grow due to the increasing use of information and communication technology. Trends in this sector are important in view of the growing significance of services in terms of value added to the economy. The services sector is projected to increase its productivity through specialisation towards higher value added products, and also reduce intensity via changes in the fuel mix and the adoption of improved technologies, as well as some energy uses approaching saturation. The potential for future improvement in the household sector remains substantial, but nevertheless, baseline projections for the EU-25 suggest that the growth rate of energy intensity in the household sector will rise, although the rate of increase will decline out to 2030. Energy demand for heating purposes is expected to increase slowly, whereas the need for energy for electric appliances and air conditioning is predicted to grow considerably faster over the next 30 years (European Commission, 2004). Construction techniques and equipment for more energy efficient buildings have evolved rapidly in recent years, but take considerable time to penetrate throughout the building stock.
Overall projections to 2030 for the EU-25 suggest that energy use per person is increasing. This is linked to increasing wealth (GDP per capita). However, the rate of energy consumption increase is expected to be slower than the rate of GDP increase, leading to an overall decrease in final energy intensity out to 2030, with the rate of decrease accelerating in subsequent years. Nevertheless, further actions are needed to improve awareness about energy efficiency and stimulate the uptake of energy efficient technologies if the EU is to make substantial improvements in energy intensity over the longer term. Following significant improvements in energy intensity during the past decade, driven by economic restructuring, the energy intensities of the new Member States are projected to improve at rates well above the EU-25 average up to 2030. However, the average energy intensity of these countries is still expected to be significantly worse than the EU-15 even in 2030 (by around a factor of two). Under a low carbon energy scenario that assumes the introduction of a carbon permit price (EEA 2005), the energy intensity of the household sector would increase at a slower rate than the baseline and the overall final energy intensity, and the energy intensity of all other sectors would decrease more rapidly. The most important relative reductions in household energy intensity suggest that this sector has a large potential for further efficiency improvements.
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