Energy Efficiency – How Europe Can Achieve Its 2020 Targets

Becoming more energy efficient is perhaps the most straightforward and least expensive way of tackling the energy problem. Recently, the EU has addressed this issue within the framework of the so-called Europe 2020 targets which aim at reducing gross energy consumption by 20 %, producing at least 20 % of all energy from renewable sources and reducing greenhouse gas emissions by 20 % (with respect to 1990 levels). All that is supposed to be attained by 2020 at the latest.

Leaving aside the two latter issues, we will focus in this posting on the question of energy efficiency. Lowering energy consumption by 20% (when compared to projected levels) means in particular that by 2020 Europe will use some 1474 Mtoe (mega-tonnes of oil equivalent) of primary energy.

Fig. 1 shows the development of EU gross inland consumption from 1990 onwards with EU-27 representing the entire union whereas EU-15 refers to the “old” Member States, i.e. excluding those countries which joined the union in 2004 or later.  One striking observation is that during the past two decades consumption figures have always been substantially higher than the 2020 target line. Thus we are facing a real challenge.

Fig.1 EU gross inland consumption of energy. Source: Eurostat.

But looking at absolute consumption levels only does not reveal the whole story since, at the same time, we are also expecting economic growth. And a growing economy means higher energy consumption, at least to some extent. Putting consumption and economic performance together yields another interesting observable, namely the so-called energy intensity which is shown in Fig. 2. This parameter indicates how much energy is needed in order to produce one unit of economic output. Energy intensity is thus measured in kgoe/kEUR (kg of oil equivalent per 1000 EUR). Apparently, this indicator has fallen drastically since 1991.  In 2010 it was at 168 kgoe/kEUR for EU-27.

Fig. 2 EU energy intensity. Source: Eurostat.

One apparent feature of this figure is that the gap in the intensity levels between EU-27 and EU-15 is getting smaller over the years, thus indicating that the countries which joined the EU in 2004 or later are outperforming the older Member States (EU-15) when it comes to becoming more energy efficient. Nevertheless, the energy intensity of the younger EU members is still considerably above average.

Reducing absolute energy consumption means that intensity figures will drop accordingly. But by how much? In order to obtain an answer to this question, we analysed two scenarios, one with a stagnant economy, i.e. no (real) GDP growth up till 2020, and another one with an average GDP increase of 2 % annually.

Taking the zero-increase economy as a reference we find that energy intensity must drop from its 2010 level to some 141 kgoe/kEUR in 2020. This is not too far from the current EU-15 level (151 kgoe/kEUR). However, at EU-27 level this means that the intensity has to go down by some -1.75 % on average per year.

Going over to a more dynamic scenario with an average economic growth rate of 2 % we find the respective energy intensity in 2020 at 115.5 kgoe/kEUR. Obviously, the effort is much stronger in this case, requiring an annual decrease of almost -3.7 %.

To put things into perspective we may mention that the average intensity gain during the period 1991-2010 was 1.94 % per year. Thus, the prospect of performing equally well in a no-growth economy does indeed look quite promising. However, once the economy is supposed to grow even at a moderate pace, our effort may easily double.  In that case, more drastic measures are required in order to attain the ambitious goal.

Heating Degree Days and Energy Consumption

Heating degree days (HDD) may serve as an indicator for the amount of energy used for heating purposes. The correlation seems to be pretty obvious: a larger number of HDD should inevitably lead to a corresponding increase in energy consumption. This relationship should, as a consequence, be reflected by the amount of primary energy used. Of course, heating is not the only way to consume energy. Traffic, industrial production and services equally request their share in primary energy demand.

In Germany, heating accounts for about 30 % of total final energy consumption. Thus, if the number of HDD is up by, say, 10 % then we would expect the consumption figures to increase accordingly. The question is to what extent the latter would reflect changes in HDD. Let us demonstrate this via a simple thought experiment. Imagine Germany consumed 100 units of final energy in 2009, 30 of which were used for heating. The number of HDD was x. In 2010 HDD increased by 10% compared to the previous year. Thus we would expect a total of 33 units being absorbed for thermal comfort. Everything else remaining unchanged, the total final energy consumption in 2010 would amount to 103 units. Thus, the total consumption figure would be up by 3% in 2010.

Does this argument also hold good for primary energy consumption? Let us have a look at two countries of similar size and climatic conditions, namely Germany (Fig. 1) and UK (Fig. 2). The source data have been taken from BP Statistical Review of World Energy 2011 and Eurostat. The figures show primary energy consumption per capita (CPC) in tons of oil equivalent (toe) and the number of HDD in the respective country.

Fig. 1 Primary energy consumption per capita (in toe) and HDD in Germany

Consumption figures in Germany reflect changes in HDD only partially, as expected. At the end of our observation period we even note that a significant rise in HDD is met by a slump in consumption per capita. Between 1994 and 1996 HDD went up by more than 27%. The respective rise in CPC was a mere 3.3%.

The UK data are as follows.

Fig. 2 Primary energy consumption per capita (in toe) and HDD in UK

Again, the changes in consumption per capita are much less pronounced than the respective variations in HDD. In 1995/96 HDD increased by some 11.5 %, whereas CPC went up by 4.5 % only. As in the German case, towards the end of the obervation period a clear upward trend in HDD is met by a significant drop in CPC.

Heating degree days have certainly their merits when it comes to estimating energy needs for thermal comfort. However, on a more global scale, their usefulness is relatively limited. In any case, their importance should not be overrated.

Heating degree-days

What are heating degree-days and what are the advantages and limitations of that conept? Generally speaking, heating degree-days (HDD) represent a sensible measure in order to estimate how much energy must be provided for heating purposes.

It´s cold outside, you turn on the heating. The colder it is, the more you have to heat, if you want to keep the room temperature at a convenient level. As a consequence, you need more energy, if the outside temperatures are lower. Thus the temperature difference between inside and outside to a large extent determines how much oil, gas, wood or electricty you need in order to keep your place cosy and warm.

But this is not the only parameter having an impact on your heating bill. Another factor of crucial importance is the numer of days you have to keep the heating running in the first place. Wintry weather conditions and their duration can vary considerably from one year to another. Last year, at the beginning of November, outside temperatures in northern Europe were already below 0° C. This year, however, in the same region the thermometer has hardly ever touched the freezing point, thus saving a lot of energy costs.

So we see that two crucial parameters determine the heating effort: the temperature difference between living room and outside on the one hand and the duration of the period when the heating is on.

Formally speaking, following the definition used by Eurostat, HDD may be defined as follows:

HDD = (18° C – Tm)*d,  if Tm <= 15° C  or

HDD = 0,  if Tm > 15° C

In this formula, d represents the number of days when heating is considered to be required and Tm is the mean outside temperature defined as Tm = (Tmin + Tmax)/2. Thus, Tm is an average value of minimum and maximum temperatures during a certain period. But when is the heating actually on? According to Eurostat the heating is on when Tm <= 15° C, whereas for Tm > 15° C it is off and then HDD = 0.

In this way, we have obtained an important indicator for the amount of energy which is needed in order to keep our living or working space at an agreable level.

However, HDD in itself is not sufficient to determine or even estimate the actual amount of energy necessary for heating purposes. To that end, more input is needed. In particular, we need to know how big the energy flow from our living and/or working premises to the outside world is. Clearly the heat flow is directly proportional to the difference in temperatures as indicated in the formula for HDD. Yet, the amount of heat passing from the cosy appartment to the cold and sometimes frosty environment also depends on the insulation we use in order to reduce the loss of heat. The insulation in turn is closely linked to the construction materials used.

Fig. 1 gives us an overview over HDD in the EU-27 and some selected countries. The raw data for this have been taken from Eurostat.

Fig. 1 HDD in EU-27 and selected countries, 1980-2009

Apparently, there is a clear distinction between several countries, depending on their geographical location. HDD for Germany and UK are closely following the EU average. The northern countries Sweden and Finland are placed well above that average, whereas the southern Member States Spain and Portugal find themselves well below that value. The mean deviation from the EU average amounts in the case of Sweden and Finland to 67% and 79%, respectively. Spain and Portugal, as the antipodes in HDD,  are as far as 43% and 60% below the European mean value, respectively.

HDD reflects the climatic conditions of each country. Average temperatures are considerably lower in Europe´s northern periphery and in the southern part. Therefore the difference in HDD between Finland (5800 on average) and Portugal (1300) is easily explained. Taking HDD as the only reference, Finland would need more than 4 times as much energy for heating than its couterpart. However, comparing these figures with the energy consumption per capita for both countries (Finland 5.3 ktoe and Portugal 2.2 ktoe, annual average for 1991-2010) yields a clear indication that there must be some features which tend to soften the sharp discrepancies. Among these are the standards for heat insulation (which can vary between different countries), the number of cooling degree days (having an opposite north-south tendency) and the level of industrialization.

Energy per capita

It doesn´t come as a surprise that bigger countries consume larger amounts of energy than smaller ones. In general, at least. And yet, there are exceptions to this rule. US consumption of primary energy was 2204.1 Mtoe in 2009 according to BP´s Statistical Review of World Energy 2011. In the same year Canada used some 312.5 Mtoe.  The two neighbours are roughly equivalent in terms of economic performance (with GDP per capita in the US being larger than the respective quantitiy for Canada). Thus the main reason for explaining the difference is by reference to the population numbers. Here the US with 307 millions outweighs Canada with 33 millions. However, there are also other factors coming into play, as we shall see later.

A nice example that population is not the only parameter steering energy needs is given by comparing Germany and Mexico. Although Mexico has considerably more inhabitants (107 millions vs. 82) its consumption figures are significantly lower than the German ones (167 Mtoe vs. 307 Mtoe).

A sensible quantity for measuring the energy hunger of a particular economy is the primary energy consumption per capita. In that way, size effects stemming from largely different populations are normalised. The philosophy behind this is similar to the one of energy intensity which measures consumption per unit of GDP.

In the following we consider a number of developed economies and look at their energy hunger per head. We will find out that there are considerable differences between those countries although, at first sight, they may appear to be very similar in nature. The raw data for the following investigations have been taken from BP´s Statistical Review of World Energy, from the UN Statistics Division and from the CIA World Factbook.

Fig. 1 Primary energy consumption per capita in ktoe, 1991-2010

Although each of these countries is part of the wealthier economies of our planet, their energy consumption per head reveals some striking differences. We may observe that during the past 20 years the figures have not changed dramatically. Norway´s figures, though, show some variation, however, without any clear trend to higher or lower values.

One of the intentions of our choice was to highlight consumption characteristics between northern and southern countries. And indeed, the southern branch consisting of Italy, Portugal and Spain is well separated from their northern counterparts Canada, Norway, Finland and Sweden. In fact, there is even a significant gap between Sweden and Finland on the one hand and Canada and Norway on the other.

Having the north-south distinction as a particular feature we may come forward with some explanations on the seemingly unbridgable gap between the northern and southern economies. Obviously, one of the strongest arguments is based on climatic variations. Average temperatures are lower in nordic countries than in the southern ones which explains part of the difference. In order to have a reliable measure on how energy consumption is triggered by climatic circumstances we apply the concept of heating-degree days (HDD) which is used by Eurostat. Apparently, there are two parameters governing the HDD: the temperature and the number of days when heating is necessary. Without going into details we may state that the  nordic countries (except Canada) had more than 5000 HDD in 2009, whereas the Mediterranean countries managed with well under 2000 HDD.

Although the HDD concept is able to explain much of the difference, it is still not reflecting reality in total. The other factor coming into play here is the economic performance of each country expressed in GDP per head. Here, too, we see a gap between the two blocs. In order to visualise differences we take the average of both, the GDP and the energy consumption per capita, and scrutinize the deviations of both of the blocs from the mean value. The result is given in Fig. 2.

Fig. 2 Deviation of GDP and energy consumption per head from average in %. Data from 2009.

Fig. 2 gives us an indication that the energy intensity (which is pegged to the GDP) is closely linked to the consumption per capita, thus reflecting the economic performance of a country and its inhabitants. Those countries with a higher GDP per head tend to have also a higher primary energy consumption per inhabitant than the countries with a below average GDP per capita.

Although the term “energy per capita” has some intrinsic limitations, it represents nevertheless a sensible quantity if we are to understand consumption patterns and their causes. It is particularly sensitive to take into account factors like the degree of economic development and the temperature zone of a given country. Otherwise our conclusions might be distorted, especially when comparing countries with different economic background and/or geographic distribution. It goes without saying that Canada will consume more energy per inhabitant than, say, Portugal, simply because of its relative positioning on the globe. However, geography does not account for everything. We have to make allowances for differences in industrial and economic power as well. And again Canada, having a considerably higher GDP per head, is better off  than Portugal. Putting everything together will allow us to draw the right conclusions from the rough picture the concept of “energy per capita” provides us with.