Energy Efficiency in Austria

In a recent posting we had a closer look at the development of energy efficiency in the UK. Then we found that various sectors of the economy have been performing differently over the years. Some sectors managed to lower their energy hunger drastically, while others were much less successful.

Now we are going to look at the situation in Austria. There, too, has been much talk about the need to save energy. But how much of that has actually materialized into lower consumption or, to put if differently, higher efficiency? The Austrian statistical office, Statistik Austria, provides data on various sectors. We were particularly interested in the following areas: industry, domestic consumption and passenger transport.

Fig. 1 gives an overview of the energy efficiency of those sectors between 1990 and 2010. The figures are indexed with 1990=100, and the individual graphs refer to the following quantities: industry means industrial consumption per unit of output, domestic total refes to consumption per household, and passenger transport stands for energy use per passenger-km.

Fig. 1 Energy efficiency in Austria. For detailed explanations see text.

What do these graphs tell us? The clearest message stems from passenger transport showing a significant decrease since 1990 (83 index points in 2010). That is considerably more than what we have found in the UK. It seems that the Austrian car fleet is more modern than the one in UK.

Domestic consumption also tends to become less, though at a much more moderate pace (94 in 2010). It should be noted that those data have not been corrected for temperature effects which can lead to varying energy demand during the winter months. Industry consumption, too, tends to go down over the years, however, with strong fluctuations. During the economic crisis efficiency seemed to improve a lot (87 in 2008/09). Strangely, during the recovery in 2009 it appears to have become less important and its index rose to 1990 levels (101). After that production efficiency has improved again.

We may also have a closer look at domestic consumption. To that end we split up that sector into heating (including airconditioning) and other uses. The results are shown in Fig. 2.

Fig. 2 Domestic energy use per household. 1990=100.

This figure requires some detailed analysis. First, we note that the graphs for heating and total domestic use are roughly in line with each other. This does not come as a surprise since heating accounts for about 75% of total household energy demand. This dominance tends to cover the huge variations of other consumers of household energy (lighting, kitchen equipment etc.) which do not contribute to the overall trend. On the contrary, other domestic uses reached more than 123 index points in 2003 before a gradual downturn set in. At the end of our observation period we have reached the same levels as in the beginning. That is not what we call a success story.

Comparing efficiency figures between different countries is both interesting and enlightening. Nevertheless we should be cautious in interpreting the figures even if they are presented in an indexed form. If country A does very much better than country B it does not necessarily mean that at the end of the day A is more energy efficient than B. That would only be true if both countries started from the same or at least similar levels of absolute efficiency. However, if B was already more efficient than A in the beginning in absolute terms, then, clearly, B needs to make much more effort than A in order to come down by the same number of index points.

Now what do we mean by efficiency in absolute terms? It is not sufficient to consider energy consumption per output only, but one has to make sure to be talking about the same amount of output for each country. Thus, if we have GWh/EUR for one country and GWh/GBP for the other we have to make sure that the two currencies are put into relation. We first have to put both countries on the same footing and then are we in a position to analyse their relative performance. In that way, comparing energy efficiency between different countries can be put on a solid basis.

 

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.

Energy Consumption and Productivity

In a recent study we analyzed the relationship between two basic parameters which are crucial for every economy: its final energy consumption (FEC) and its productivity level. Conventional wisdom has it that, in order to stay competitive, a modern economy has to become more productive over the years. There are clear differences between various countries as far as their productivity growth is concerned. The overall picture is such that between 1995 and the beginning of the financial crisis in 2008 economic output per working hour increased significantly in most EU Member States. Then, with very few exceptions, a general downturn set in yielding lower output figures than before the crisis. One  notable exception was Spain where productivity rose even during that difficult period.

If, on the one hand, economies are supposed to increase their production per working hour they are, on the other hand, also keen on using as little energy as possible. The aim is to produce more with the same amount of energy or, in other words, to improve energy intensity.

In order to make the two things comparable, we have indexed them, setting 2005=100, and followed them during the period 1995 – 2009. All the raw data of our investigation have been taken from Eurostat.

Let us look at the EU-27 data first (Fig. 1).

Fig. 1 Productivity and final energy consumption (FEC) in the EU. 2005=100.

We see that productivity has increased siginificantly stronger than final energy consumption (21.8% vs. 4.0%). Remarkably, just before the economic crisis, the EU managed to go up in productivity while at the same time consumption figures climbed only moderately. The crisis of 2008 led to a slight downturn in output per hour and and to a substantial lowering of energy needs.

The overall EU picture is nicely reflected by Germany showing a similar pattern (Fig. 2).

Fig. 2 Productivity and final energy consumption in Germany, 2005=100

Germany´s final energy consumption index has been fairly stable over the years, mostly oscillating between 95 and 100 and reaching its lowest value in 2009  (-3.5%). Her economic performance, on the other hand, was outstanding (+20.1%). Similar conclusions may be drawn for France and the Netherlands which are not shown here.

The situation is strikingly different in the case of Spain (Fig. 3).

Fig. 3 Productivity and final enrgy consumption in Spain, 2005=100.

First we note that Spain´s productivity gain has not at all been outstanding over the 14-year period. Compared to other countries like Germany, the increase was rather moderate (9.6%). Second, energy consumption has gone up at a much higher pace than output per hour (39.6%). As a consequence of economic crisis the consumption index went down for the first time in more than 10 years. A rather similar conclusion can be drawn for Italy (not shown), whereh a moderate rise in productivity was met by a soaring energy consumption. After 2005 consumption figures came down here, too, and the productivity index followed shortly after.

The situation looks entirely different in Sweden (Fig. 4).

Fig. 4 Productivity and final energy consumption in Sweden, 2005=100.

In terms of energy consumption Sweden has steadily gone down (-9.5%) whereas productivity gains were quite impressive (30.3%), the latter, not surprisingly, being shaken by the global economic situation from 2007 onward. This picture clearly reveals that Sweden not only managed to produce considerably more per working hour but also with less energy.  The situation is a bit similar in the UK (Fig. 5) with substantial improvements on the productivity side (30.5%). Consumption figures, on the other hand, show a slight downward trend though less pronounced than in the case of Sweden (-3.2%).

Fig. 5 Productivity and final energy consumption in the UK, 2005=100.

Thus, it is possible to see productivity rising and at the same time consume less energy. If, however, energy consumption is growing faster than productivity, this clearly indicates that there is a gap in energy efficiency which needs to be closed. Some countries set nice examples of how this can be achieved.

Energy Intensity in Europe, the US and Japan

In the previous posting we analyzed the development of energy intensity at a European scale. The findings were twofold: on the one hand, we saw a clear tendency to lowering the amount of energy per unit of GDP. This means that energy is used in a more efficient way. On the other hand, there are still remarkable differences between the EU member states. The gap between, say, Spain and Denmark which amounted to 63.72 kgoe/1000 EUR in 1995 has actually widened over the years and was at 79.44 in 2009. Thus, Denmark has clearly done better than Spain during that period. This, in turn means, that there is substantial room for improvement on the Spanish side.

Arguably one might say, that Spain and Denmark are not at the same level in terms of productivity, and that is certainly a valid point. However, from the Spanish point of view it is strongly desirable to become more competitive and thus increase its productivity.

In this post we want to have a closer look at the energy intensity of the three main economies in the world having comparable levels of productivity: the EU, the US and Japan. The raw data for the following analysis have been taken from Eurostat. As usual, the quantity in question is measured in kgoe/1000 EUR of GDP.

Fig. 1 Energy intensity in the EU, US and Japan, kgoe/1000 EUR

First, we observe a decline of energy intensity in all three economies. However, this decline is much more pronounced in the EU and the US than in Japan. During the period in question the US saw its intensity figure falling by 25.6%, while Europe faced a decline of 20.9%. Japan, on the other hand, came down by a mere 11.8%. Why is that so? It seems that Japan has already reached a saturation level when it comes to using energy in the most efficient way. The US and Europe have considerably improved their output figures, delivering a higher GDP per unit of energy used.

Nevertheless, there is still a huge gap between the two “Western” economies and Japan. Clearly, the gap is narrowing. In 1995, it was some 104.9 kgoe/1000 EUR between the EU and Japan, while the respective difference between the US and Japan was 134.6. In 2009, this has come down to 73.5 (EU-Japan) and 85.7 (US-Japan), respectively. Thus, the United States are still using almost twice as much energy per unit of GDP as Japan.

Improving productivity and introducing energy saving measures are the key parameters if we want to perform equally well as Japan. Clearly, Japanese economy has set the baseline which we should try to achieve. It is possible to bring energy intensity down to less than 100 kgoe/1000 EUR. However, this may take several decades given the current level of progress.

Energy Intensity

Common opinion holds that if economic activity is increasing the consumption of energy will follow suit. At first glance this seems a convincing argument: producing 10 cars uses 5 times more energy than producing 2 cars. However, reality is not quite that simple.

First of all, there are scale effects coming into play. You do not switch on the whole production chain for each car individually, but rather try to produce the whole lot “in one go” which means that the entire production process will become more efficient which, in turn, helps saving energy. This essentially means that the scaling factor in the above example is no longer 5 but less than that.

Apart from making economic processes more efficient there are other factors which determine the level of energy intensity. Introducing energy saving measures, using machinery with a lower energy consumption, changing consumption patterns and other issues may lead to a lower energy intensity. So what is energy intensity? It is defined as the inland consumption of energy (coal, oil, gas, electricity and renewables) per unit of GDP within a certain period, usually one year.

As energy is an important cost factor it is desireable to minimize its use per economic output. This is true not only at the level of entreprises or businesses, but also for the economy as a whole. If we manage to produce more with the same (or even less) energy we may in the long run reduce our import dependency. However, so far the successful lowering of the energy intensity at European level has not yet led to a significant reduction of energy imports from third countries.

In Fig. 1 we see the energy intensity in kg of oil equivalent (kgoe) per 1000 EUR of GDP for EU-27, EU-15, Germany, France, Italy, UK and Spain from 1990 to 2009. Note that there are no data available for 1990 for EU-27. EU-15 and Germany (year of unification between East and West Germany). All data are taken from Eurostat.

Fig. 1 Energy intensity in kgoe/1000 EUR of GDP

One striking observation is that all countries of our selection as well as the EU as a whole have managed to reduce their energy intensity considerably since 1995. At EU-27 level the respective level has gone down by almost 21 %. Germany could reduce its energy intensity by almost 18 %, whereas UK managed to cut it by more than 30 %. On the other hand, the figures for the southern countries Italy and Spain are less impressive with 6.8% and 6.1%, respectively.

Another remarkable feature of our data sample is that intensity lines for individual countries generally do not cross. The line representing France is always above the one representing Italy. At first glance, this may imply some “intrinsic factors” like climate conditions, differences in economic profile (agriculture, heavy industry etc.) which may explain a certain “unbridgeable” gab between countries. However, as our figure clearly indicates, it is indeed possible that country lines cross each other. UK, starting out at an energy intensity well above Italy in 1995, has succeeded to fall consistently below the Italian level. Moreover, this is not a short term fluctuation, but rather can be safely considered a consistent trend. This, in turn, indicates that energy saving measures may have a significant impact on the efficiency of energy usage.

The decoupling of economic performance and energy consumption can be seen in the following two figures referring to Germany and Denmark, respectiveley. In order to facilitate the visibility of the effect we had to adjust the figures somewhat as will be explained immediately. Fig. 2 shows the case of Germany during the period 2001-2009.

Fig. 2 Germany´s inland consumption vs. GDP

The figures for the GDP are given in G€, whereas – for better visibility – inland consumption has been scaled as Mtoe*5. This puts the two curves close to each other and clearly indicates the respective trends.

Fig. 3 shows a similar pattern for Denmark. Here again, the GDP is plotted in G€, and inland consumption is put on a scale of Mtoe*10.

Fig. 3 Inland consumption and GDP in Denmark

Both, Fig. 2 and Fig. 3 show the impact of the economic crisis starting in 2008 on economic output and inland consumption. Nevertheless, during the years before the financial crisis it is obvious that an increase in GDP comes together with a decreasing energy consumption.

One question to be asked is whether there is a lower limit to the energy intensity which cannot be undercut. One is inclined to think that a country´s level of energy intensity may be largely determined by factors such as climatic conditions, the level of industrialization etc. However, it is possible that northern countries may “beat” the southern ones, as the case of UK and Italy indicates. Moreover, there are substantial differences even between countries situated a similar latitudes like Italy and Spain. This, in turn, may indicate that there is still a considerable potential for improvement in the case of Spain.

Summing up, we can conclude that it is possible for developed economies to have a growing GDP while at the same time keeping energy consumption stable or even lowering it.