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The industrial sector comprises manufacturing and other nonmanufacturing industries not included in transportation or services. Manufacturing includes 18 industry sectors, generally defined at the three-digit level of the North American Industrial Classification System (NAICS). The nonmanufacturing sectors are agriculture, forestry and fisheries, mining, and construction. The manufacturing energy data include purchased electricity and fuels consumed for heat, power, and electricity generation; energy used as a material (primarily petrochemical feedstocks) is excluded. Figure I1 below shows how industrial sector energy intensity has changed over time.
Because some users may wish to see manufacturing separately broken out from the industrial sector, a separate analysis for manufacturing is available here. It should also be noted that the data quality and consistency for manufacturing is better than that for nonmanufacturing. A complete discussion of the data sources and indicators construction for these two broad subsectors is provided in Section A.3 of the 2014 comprehensive report.
Results for the industrial sector presented below are based on source energy consumption. The energy intensity index, shown in Figure I1, has been adjusted for changes in electric utility efficiency for the period between 1970 and 2011.
- Activity: The top line in Figure I1 shows that industrial sector Gross Domestic Product (GDP) increased 52% between 1985 and 2007; by 2011 GDP had not yet exceeded the 2007 peak in spite of some recovery from the 2008-2009 economic recession.
- Energy use: Over the years from 1970 to 1985, industrial source energy consumption fell, with the largest declines in the early 1980s. Peak industrial energy consumption occurred in 2000, growing more than 20% after 1985. Weak economic conditions have led to a sharp drop over the 2009-2011 period. Source energy consumption was about 9% higher in 2011 as compared to 1985.
- Energy intensity index: Energy intensity declined by 18% between 1970 and 1985, and about 14% between 1985 and 2011. Most of the decline since 1985 occurred between prior to 2003. (Without the adjustment for electricity generation efficiency, the intensity index in 2011 would be about 16% lower than 1985. See Energy Intensity Changes by Sector, 1985-2011.)
- Changes due to factors unrelated to efficiency improvements: Other structural factors, not directly related to declines in energy intensity for specific industries, have made a large contribution to the decline in industrial energy use since 1985. Taken together, these factors have contributed to about a 10% decline in total industrial energy use relative to total GDP in the industrial sector.
The change resulting from other factors, shown in Figure I1, is a composite of two effects, the change in manufacturing as a fraction of total industrial output over time, and the changes (primarily shifts among industries) that have occurred over time within manufacturing. These components are shown in Figure I2 below. The line labeled "Relative Mfg / Non-Mfg Growth" indicates that manufacturing, which is more energy intensive than nonmanufacturing, has grown relative to total industrial GDP, with most of that change occurring since 1995. This factor has added about 26% to energy use since 1985 (and equivalently to an aggregate energy intensity index, measured by the industrial energy-GDP ratio), most of this effect occurring after the recession in the early 1990s.
The line labeled "Within Mfg Structure" primarily reflects compositional shifts within the manufacturing sector, i.e., manufacturing industries that are less energy intensive have grown relative to those industries that are highly energy intensive, thus reducing the energy intensity of manufacturing as a whole. A major contributor to this result is the rapid growth of the computer and electronic manufacturing industry (NAICS industry 334). The output of this industry has grown by over a factor of 10 since 1985 (now accounting for about one-fifth of manufacturing GDP), while energy use has actually decreased over that period.
In addition to these compositional shifts within manufacturing is another type of structural impact that pertains to the measurement of industrial output. The system of industrial intensity indicators attempts, in part, to explain aspects of the change in the energy-GDP ratio over time. The Bureau of Economic Analysis maintains two sets of data related to the measurement of economic output for each sector in the economy: 1) Gross Product and 2) Value Added (consisting primarily of labor compensation, gross profits, and indirect business taxes) by industry. Gross Product corresponds more closely to the actual physical production of the industry, roughly measured as the price-adjusted value of production. In the system of energy intensity indicators, the energy intensity for each industry is defined by energy use divided by the Gross Product of that industry. However, at a more aggregate level, Value Added (as a contribution to overall GDP) is a more conventional measure of output. For the manufacturing sector, the system of intensity indicators includes a separate factor that provides a linkage from changes in the ratio of Value Added to Gross Product over time. The measures of Value Added (that reflect the price-adjusted GDP attributable to a particular sector) have increased relative to Gross Output for the majority of manufacturing industries used in the indicators system. For the manufacturing sector as a whole, this factor accounts for about 15% of the overall structural impact between 1985 and 2011 (with the other 85% accounted by compositional shifts among manufacturing industries noted above). The overall effect of these two structural shifts has been a reduction of aggregate industrial energy use or intensity by about 35%. More extensive discussion of how structural factors were handled in the manufacturing and industrial sectors can be found in the 2014 comprehensive report.