Energy Intensity Defined
Energy intensity refers to the ratio of energy use to a unit of activity. It is usually measured in units of energy per unit GDP.
A high value of energy intensity means a high quantity of energy used for a certain level of economic activity. In effect, the cost is high per unit of GDP.
Importance of Measuring and Tracking Energy Intensity
Measuring energy intensity is an important tool for policymakers trying to decrease energy use without reducing economic activity levels.
For example, if a manufacturing business uses lots of power but does not produce enough goods to justify that use, the measure of energy intensity would be useful information to have.
This could help form public policy beneficial to the environment and the economy.
Additionally, tracking changes in the economy's energy intensity enables one to observe how efficiently an economy produces more output while using less input.
Factors That Affect Energy Intensity
Price of Energy
The price of energy plays a huge role in the equation. When oil prices rise, so does the cost of electricity.
While one might assume that higher oil prices will automatically lead to less consumption, there are other economic implications.
Higher fuel costs can encourage more efficient transportation and production decisions.
The effect of these changes on the country level is debatable, however.
Population and Demographics
A greater number of young people usually means more growth. It also means more new buildings and infrastructure in the form of roads, railways, and others.
This all requires materials that require energy to produce.
Similarly, larger populations are likely to mean increased electricity use for household appliances and home heating/cooling units.
Climate
Another factor is a country's climate. The colder it gets, the more energy people need to keep warm indoors and run heating units. The same goes for cooling in hot climates.
Technological Innovation
As time passes, efficiency can increase because of technological innovations.
For example, the number of appliances per household may decrease as companies invent new appliances that use less electricity.
New technologies could also lead to a decrease in the intensity of a country's transportation sector.
For example, electric/hybrid cars will reduce the intensity because of lower fuel requirements to transport people and goods from place to place.
Economic Structure and Output
Given a fixed level of economic activity, an economy that produces more goods with a high embedded energy content will have a higher intensity than an economy that produces the same amount of goods using a lower energy content.
For example, if one economy produced vehicles while another produced paper and pencils, then the vehicle-producing economy would have a higher intensity since vehicles require more energy to produce.
Economic Policies
Finally, some countries pursue policies specifically designed to encourage greater efficiency in electricity production and transportation use. This, in effect, will lower their overall intensity.
These measures can include fuel taxes or environmental regulations, such as carbon caps or clean air standards for power plants.
Benefits of Reducing Energy Intensity
Improved Energy Security
Reducing the consumption rate of domestic fuel resources (i.e., petroleum products) reduces dependence on foreign fuels.
This improved energy security has many benefits, such as bolstering a country's economy, stabilizing international markets, and providing greater supply flexibility in times of emergency.
Decreased Demand for Oil Consumption
Reducing demand for petroleum products is another way of lowering its overall intensity. If a nation's economy requires less oil for production, then its oil consumption—and, thus, energy intensity—will decline.
For example, the automotive sector of an economy switching to electric vehicles or fuel cells would significantly reduce the demand for petroleum products.
Decreased Environmental Impacts
Lowering overall intensity can also help reduce the environmental impacts associated with using certain fuels and resources.
Reducing energy-intensive production across the board means high-carbon-emitting activities can also be scaled back. This would decrease the pollution related to producing energy resources, domestically and abroad.
How to Reduce Energy Intensity
Transportation
As stated above, government policies can play a role in encouraging more efficient transportation use.
These measures might include fuel taxes or emission standards for vehicles.
Another option could include developing public transit systems. This would reduce intensity by cutting the number of cars on the road.
Promoting ride-sharing could potentially cut down on transport emissions as well.
Industry and Housing
Manufacturing and construction activities require large amounts of energy to run and tend to be relatively energy-intensive.
Encouraging greater use of renewable modes of power generation within these sectors would provide benefits, such as greenhouse gas reduction, increased energy security, and decreased environmental degradation.
In general, it would be beneficial for countries with a lot of manufacturing or construction activity to encourage greater efficiency in these sectors. This is achievable through taxes on carbon emissions and/or energy taxes.
Electricity Generation
A country's mix of electricity-generating technologies is another important factor in determining its overall intensity.
Some fossil fuel power plants have relatively high thermal efficiencies, while others have lower ones. Thus, switching from less efficient technologies (e.g., coal) to more efficient ones (e.g., solar thermal) can significantly reduce a country's energy intensity.
Renewables also tend to be more efficient than conventional resources like natural gas or petroleum products.
Finally, increasing the use of distributed generation can also reduce electricity intensity. These technologies rely on local resources and are, thus, less susceptible to transmission losses.
Government Assistance
Governments can also work to reduce energy intensity by providing direct assistance for investment in more efficient technologies and processes.
This support could entail subsidies, tax breaks, or other financial incentives. The government could then regulate the maximum level of energy intensity that any specific industry can attain.
Energy Efficiency vs Energy Intensity
Decreasing a country's energy intensity is not the same as improving its overall energy efficiency.
Energy efficiency refers to the delivery of "energy service" per unit of energy input. Energy intensity refers only to the weight per unit volume of a fuel source consumed for a given purpose. It does not account for an economy’s efficient use of that fuel.
In general, when countries grow, they tend to import more goods from other countries, which can lead to more coal, oil, and gas being imported into the country.
Energy intensity would, therefore, tend to increase with GDP growth even if energy efficiency improved at the same time. This is because energy intensity looks at volume while energy efficiency considers both volume and weight.
Moreover, while eliminating waste during production processes through improved technology is a form of energy efficiency, it also tends to be a factor that drives down the overall intensity.
For example, when a factory adopts an advanced process instead of an old one that requires greater amounts of raw materials, it becomes more economically efficient by generating more profits or producing higher-paying jobs.
But these efficiencies also make it possible for the factory to use less material without sacrificing any output, resulting in improved energy efficiency and reduced intensity.
Conclusion
Energy intensity is a crucial indicator of an economy’s environmental performance that can be measured for specific sectors or industries.
There are many potential steps that governments and businesses can take to not only reduce energy intensity but also prevent further increases in energy use during economic development.
FAQs
1. What are some common misconceptions about the meaning of energy intensity?
One common misconception is that it can be interpreted as a measure of total economic output. This would be untrue if, at the same time, other factors were increasing production or consumption levels. The correct interpretation is that while production and consumption levels have increased, they have done so using less energy per unit produced or consumed.
2. How does technological innovation help in decreasing energy intensity?
Innovations in the materials used during manufacturing processes can make goods more efficient and, thus, require less intensity.
3. What is GDP?
Gross Domestic Product (GDP) is a measure of the total monetary value of all final goods and services produced within a country's borders in a specific period.
4. How does efficiency affect energy intensity?
Efficiency improvements in the use of energy inputs tend to reduce energy intensity, particularly when this occurs in processes closely tied to economic output.
5. Are there disadvantages to a reduced energy intensity?
One disadvantage is that transitioning to lower-energy processes can have costs relative to their predecessors, which means that process improvements may increase production costs or result in higher prices for consumers. A second possible drawback is that improving the efficiency of a single process may encourage the use of more processes tied to economic activity, and, therefore, further energy consumption.
