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Efficiency improvements in processes and equipment and other explanatory factors can contribute to observed changes in energy intensity. Within the category "other explanatory factors" we can identify two separate effects: structural changes and behavioral factors, which are further discussed in item 2) below.
(1) Declines in energy intensity are a proxy for efficiency improvements, provided a) energy intensity is represented at an appropriate level of disaggregation to provide meaningful interpretation, and b) other explanatory and behavioral factors are isolated and accounted for.
Energy efficiency refers to the activity or product that can be produced with a given amount of energy; for example, the number of tons of steel that can be melted with a megawatt hour of electricity. At the level of a specific technology, the difference between efficiency and energy intensity is insignificant — one is simply the inverse of the other. In this example, energy intensity is the number of megawatt hours used to melt one ton of steel.
At the level of the aggregate economy (or even at the level of an end-use sector) energy efficiency is not a meaningful concept because of the heterogeneous nature of the output. The production of a huge number of goods, the mixing of the transport of freight and people, and the variety of housing and climates makes an aggregate energy intensity number based on Gross Domestic Product (GDP), a number that disguises rather than illuminates. A simple intensity measure can be calculated (as Energy/GDP), but this number has little information content without the underlying sector detail.
The distinction between energy intensity and energy efficiency is important when multiple technologies or multiple products underlie what is being compared. While it would not be sensible to compare the energy efficiency of steel production with the energy efficiency of ethanol production, it is possible to examine the energy intensity of all manufacturing.
(2) Other explanatory factors cause changes in the energy use that have no bearing on the efficiency with which energy is used. These changes may be structural, they may be behavioral, or they may be due to factors, such as the weather, over which we have no control. These are sometimes collectively referred to as structural elements and they give rise to a change in energy use per unit measure of output, but do not reflect improvements in the underlying efficiency of energy use. We provide examples of these below:
(2a) Structural changes in the economy are major movements in the composition of the economy and in any of the end-use sectors that can affect energy intensity but are not related to energy efficiency improvements. In the industrial sector, a shift in manufacturing emphasis from the energy intensive industries — primary metal, chemicals, and forest products — to less energy-intensive industries such as transportation equipment or food would cause a decline in the index of energy intensity that does not necessarily reflect an increase in energy efficiency. By the same token, if the population shifts to warmer climates, both commercial and residential heating intensity in the winter will decline, but air conditioning intensity in the summer will likely increase. Similarly, if the number of people in a household changes, overall energy use will likely change. We think of changes in the industry structure, shifts in regional population, and changes in household size as the structural components of "other explanatory factors" changes.
(2b) Changes in energy use per unit measure of output that are a result of behavioral factors also may not reflect improvements in the underlying efficiency of energy use. For example, it is well known that as people age, they will use more electricity or fuel to warm their home during the winter. While the efficiency of heating equipment in the building has not changed, the energy intensity of the house has increased to maintain a suitable living environment (conditioned space). It is sometimes difficult to separate people's behavior from structural change — for example, demographic changes, like the aging of the population, may be contributing factors to the behavioral changes.
(2c) There are also changes over which we have little or no control: Weather is the classic example. Yet changes in weather can have a profound effect on the amount of energy used, especially for space conditioning of homes and businesses. It is for these reasons that the national system of energy intensity indicators presented on this website has attempted to build up the aggregate numbers from the sector details. By building up from the details, and incorporating changes in other explanatory factors (to the extent these factors can be identified from the available data), the measures of intensity more closely approximate changes in the underlying efficiency of energy use.
Energy Intensity is measured by the quantity of energy required per unit output or activity, so that using less energy to produce a product reduces the intensity.
Energy Efficiency improves when a given level of service is provided with reduced amounts of energy inputs or services are enhanced for a given amount of energy input.