Energy Efficiency Policies around the World: Review and Evaluation

2.3 Overall Energy Efficiency Performance

A general indication of energy efficiency performance is given by the primary energy intensity, which relates the total energy consumption of the region or country to its GDP.

Primary energy intensity measures how much energy is required by each country or region to generate one unit of GDP. It is therefore more an indicator of "energy productivity" than a true indicator of efficiency from a technical viewpoint. Its level reflects the nature of the economic activity (the "economic structure"), the structure of the energy mix, the climate, and the technical energy efficiency. Trends in energy intensities are influenced by changes in the economic and industrial activities of the country ("structural changes"), the energy mix, and the efficiency of end-use equipment and buildings.

The energy intensity is generally considered a reliable indicator as it is calculated using basic statistics. However, its interpretation is sometimes questionable for countries where part of their economic activity is informal (i.e. not accounted by the GDP) and where the use of traditional fuels is significant, as their consumption is not usually well monitored.

The ODYSSEE project is using an alternative indicator, called ODEX (ODYSSEE index), which replaces the overall energy intensity to monitor energy efficiency trends in the EU .

ODEX aggregates energy efficiency trends by sub-sector (or end-uses or transport mode), measured in physical units, in a single indicator by main sector (industry, households, transport and services) and for the economy as a whole . ODEX by sector provides alternative indicators for energy intensities (industry and transport) or unit consumption (per dwelling for households) to describe the overall trends by sector.

The CIS uses three times more primary energy per unit of GDP than Europe, the world region with the lowest energy intensity (Figure 2.2 ). OECD Asia & Pacific, India and Latin America are close to the European level (about 10% higher); North America and Other Asia stand at the same level as the world average with an energy intensity of 30% higher than Europe. China's energy intensity is 40% above the average of Europe. High energy intensities in countries of the CIS and Middle East, can be attributed to various factors: lower energy efficiency, dominant role of energy intensive industries, and low energy prices.

In most world regions the amount of energy used per unit GDP is decreasing steadily: 1.6% p.a. on average at the world level between 1990 and 2006 (1.4% without China)

The primary energy intensity demonstrates a decreasing trend in most regions, as a result of the combined effect of higher energy prices , energy conservation programmes and more recently CO2 abatement policies, and other economic factors, such as the tertiarisation of the economies. There is even acceleration in energy intensity decrease since 2000, except a deceleration in energy intensity in Europe, China and Other Asia. In 2006, there is a strong reduction in the energy intensity almost everywhere due to the high oil prices. The Middle East is the only region where energy consumption has always been increasing faster than GDP. This energy intensity increase is however slowing down over time (Figure 2.4 ).
 
China, which had the highest energy intensity level in 1980, experienced the strongest improvement in energy productivity around 5% p.a. on average (and even 7.5% p.a. between 1990 and 2000).

As a result, China's energy intensity is now slightly above the world average level, whereas it was 80% higher in 1990.
This great improvement in China's energy productivity is the result of various factors: more efficient use of coal, switch from coal to oil, industry restructuring (rapid growth of equipment manufacturing industries) and higher energy prices. Their respective influences are however difficult to quantify. After 2000, the decreasing trend has slowed down significantly, to slightly less than 1% p.a. .

At the world level, the energy intensity decreased by 1.6% p.a. on average between 1990 and 2006.

The reduction was more rapid between 1990 and 2000 (1.8% p.a.) than after 2000 (1.4% p.a.), mainly because of China: the acceleration over the nineties improvement is mainly due to China.  Without China, the reduction between 1990 and 2000 is 1.3% p.a., i.e. the same as during the 1980's .  Since 2000, the improvement in energy productivity increased to 1.4% p.a. at the world level if China is excluded, because of the higher oil price in 2005 and 2006.

Energy productivity improvements in most regions resulted in large energy and CO2 emission savings, estimated at 8.7 Gtoe and 20Gt CO2 respectively in 2006 (Figure 2.5 ).  If the energy intensities of each region had remained at their 1980 level, world energy consumption would have been 8.7 Gtoe higher in 2006 (i.e. 40% higher). Compared to 1990 technologies and economic structure (i.e. at 1990 intensities), the energy savings in 2006 are estimated at 4.4 Gtoe (half of which in China, 20% in North America and 10% in Europe) and the CO2 savings at 10Gt. 

About 70 countries in the world have increased their energy productivity by more than 1% p.a. (i.e. with a decrease of their energy intensity below 1% p.a./year) (Figure 2.6 ). In about 30 countries, on the other hand, the energy productivity is decreasing (mainly in the Middle East, South Europe, Africa and Latin America).

If biomass is excluded (Figure 2.7 ), the situation looks different for developing regions e.g. Latin America, Other Asia, or the decrease is weaker e.g. China, India, or the increase is stronger e.g. Africa. The total primary intensity (including biomass) always changes more rapidly than the primary intensity of conventional energies  because of the traditional fuels substitution by modern energies.

For most developed regions (Europe, North America, CIS, Asia & Pacific OECD), a reverse trend can be observed: the primary intensity including biomass decreases less rapidly than the primary intensity of conventional energies, mainly because of a broader use of biomass in these regions. At world level, these two opposite trends offset each other and both intensities experience almost the same decrease.

To assess the energy efficiency of a country at the end-use level better, the final energy intensity is a more appropriate indicator: it corresponds to the energy consumed per unit of GDP by final consumers for energy using applications, excluding consumption and losses in energy conversion (power plants, refineries, etc.) and non-energy uses.

The final energy intensity at the world level decreases less than the primary energy intensity (2% p.a. against 1.6% p.a.). This is also true in almost all world regions, except in Europe and Latin America  (Figure 2.8 ). Reductions in the energy intensity are larger at the final consumer level than at the level of the whole economy .  This is a result of growing losses in energy conversion. This factor partially offsets energy efficiency improvements at the final consumer level in regions with declining trends. At the world level, 20% of the energy productivity gain at the final consumer level was offset, by increasing losses in energy conversion (80% in OECD Asia & Pacific, 50% in Africa, 36% in India and 30% in CIS).

As a large share of the energy used (or lost) in energy conversion can be attributed to the electricity sector, increasing energy losses can be explained by two factors:

• Increasing share of thermal electricity (almost everywhere) or nuclear (in Europe, Japan and North America) in the electricity generation mix which led to a decrease in the average efficiency of electricity generation . The recent development of gas combined cycle plants, wind and cogeneration had already reversed the trend in Western Europe. At the world level, the share of nuclear increased from 9% of total electricity generation in 1980 to 15% in 2006; over the same period the share of hydro decreased from 21% to 17%.
• Increasing share of electricity in final consumption, as a result of economic and industrial development, from 10% in 1980 to 16% at present at world level , implies increased losses in the electricity sector, unless the additional electricity is supplied by hydro, wind or imports.

In Europe and Latin America, an opposite trend is taking place, due to the recent development of gas combined cycle plants, wind and cogeneration, especially in Europe.

Energy efficiency of thermal power generation improved by 2% only since 1990 at world level (Figure 2.9 ); from 32% in 1990 to 34% in 2005.  This is far below the EU average of 40% or the EU best practice (Spain with 46% due to a high penetration of gas combined cycle power plants).

If all world regions had the same energy efficiency performance as the EU average, 420 Mtoe of fuel would have been saved in 2006, avoiding 1.3 Gt of CO2 emissions. The amount of savings would even reach 770 Mtoe or 2.4 Gt CO2 if all thermal power plants had the Spanish performance.

About 30 countries in the world have an average efficiency of thermal power generation above 40% and about the same number in the range between 35 and 40% (Figure 2.10 ).

Evaluation of the primary intensity by sector shows how each sector contributed to the variation in primary energy intensity (Figure 2.11).

The energy intensity reduction in the industrial sector is clearly visible in industrialised countries. In emerging countries and regions, households is the main sector driving the reduction in energy intensity, because of the substitutions of modern and more efficient by traditional fuels.

In the Middle East, the transformation sector explains most of the increase in the energy intensity due to the rapid development of electricity uses (e.g. air-conditioning) and the fact that electricity production is 100% thermal.

At the world level, households and industry account for two thirds of the reduction of the energy intensity (35 and 30%, respectively). Surprisingly, transport has had a lower influence on energy intensity trends, probably because of the large increase in the price of motor fuels and slower consumption growth in recent years, which brought it in line with the GDP.

Energy importing OECD countries demonstrate the lowest final energy intensity (Figure 2.12). Oil producing countries have the highest intensities.

For a given level of economic development, final energy intensities vary significantly: up to 2 times for energy importing countries and up to 3 times if large energy producers are included (e.g. Russia, Saudi Arabia, Venezuela or Iran). For energy importing countries, several factors explain such large discrepancies: different price levels, difference in the structure of the economic activity, energy supply mix, importance of energy efficiency policies etc. In particular, former centrally planned economies in Europe and the CIS, that historically had low and subsidised energy prices, usually have high energy intensities, because of low efficiency of buildings and end-use equipment.

Final energy intensities are decreasing in economically developing energy importing countries, as well as in OECD countries with significant energy resources (e.g. USA, Canada, Australia) (Figure 2.13). Several factors can explain this trend: higher prices for energy importers, saturation in some end-uses in the most developed OECD countries, effects of energy efficiency and climate change policies that are the strongest in energy importing countries and start to have an impact, mainly at the State level in USA, Canada and Australia.  Final energy intensities are however increasing in non-OECD oil producing countries and, to a lesser extent, in some countries with significant energy resources (e.g. Thailand, Brazil).

In a long-term trend, energy intensities follow a "bell curve", generally with developing countries to the left, with increasing intensities, and developed countries on the right side, with decreasing and converging values.

Overall energy intensities, whether primary or final, capture all the factors that contribute to changes in the amount of energy required to produce one unit of GDP, including technical, managerial and economic factors. In this sense, changes in the economic structure contribute to variations in overall energy intensities, although they are not generally the result of energy efficiency policies. For example, all things being equal, the tertiarisation of the economy will decrease total energy intensities, as the energy intensity of industry is six times higher than that of the service sector at world level. In other words, it requires six times more energy to produce one unit of activity in industry compared to the service sector.

In OECD countries, the difference in these intensities is around 4.5 to 6 depending on the region. In non-OECD countries it is even higher, around or above 10. The effect of structural changes is especially important in countries with rapid economic growth.

The share of industry in th GDP varies from 20% in North America, to 25% in Europe, India and Africa, around 30% for the world average, Latin America, OECD Asia and Pacific and around 60% in China. The share of services is about 20% in China, around 50% in Latin America, CIS, India, and at world level, 60% in Europe and OECD Asia & Pacific and 75% for North American countries.

In order to monitor better energy efficiency trends in relation to energy pricing and energy management policies, it is necessary to exclude the influence of structural changes. This is achieved by calculating energy intensity at constant GDP structure, i.e. assuming a constant share of agriculture, industry and services in the GDP as well as a constant share of the private households consumption in the GDP .

The difference between the actual evolution of the final energy intensity with that at constant economic structure shows the influence of structural changes on the economy (Figure 2.14).

The intensity at constant GDP structure can be considered as a better indicator to capture trends in energy productivity than the usual energy intensity.

For most regions, the final intensity at constant structure decreased less than the final energy intensity. This means that part of the energy intensity reduction (i.e. part of the energy productivity improvement) was due to an increasing share of services in the GDP, the less energy intensive sector. In Africa for instance, structural changes explain about two third of the decrease in the final energy intensity between 1990 and 2006. In Latin America and other Asia, about one fourth of the reduction can be attributed to structural changes and in Europe 20%.  In OECD countries, structural changes had a limited impact over the period as most of these changes took place in the 1980s. In CIS and India, there was an opposite but marginal trend: as a result, the actual energy productivity reduction is slightly higher than shown previously. It should be also be pointed out that, the most important economic restructuring was in industry and has not been measured in this study (probably most important in China).

Differences in GDP structure among countries and regions will affect their relative energy intensity levels. For instance, a region with a high share of industry in its GDP, all other things being equal, will have higher energy intensity than other regions. To improve the comparisons among countries and regions, final energy intensities can be adjusted to the same GDP structure  (Figure 2.15). The adjustment is particularly significant in non-OECD countries with a higher contribution of industry to the GDP, compared to Europe.