3.2 Demand Side: Energy and Energy-Intensive Materials Efficiency

There is growing recognition in industrialised countries that some of the greatest and most cost-effective opportunities for sustainable energy development involve improving end-use efficiency by providing the same energy service with less energy inputs or, to achieve more energy services for the same energy input. Over the last decade, much has been learned about these opportunities, about the institutional obstacles to their exploitation, and about how policies might be better shaped to capture these opportunities. These opportunities are not nearly so well understood in developing countries where the need for improved energy end-use efficiency is greatest.

Classification of Energy Efficiency Measures: There are two types of energy-efficiency measures: (1) more efficient end-use of energy in existing installations (efficiency retrofits) through improved operation and maintenance and/or replacement of some components; and (2) more efficient end-use of energy in new installations, equipment, etc. This can be achieved through systematic introduction of more energy efficient systems and technology introduced at the point of capital turnover and expansion.

the greatest and most cost-effective opportunities for sustainable energy development involve improving end-use efficiency

Specific energy consumption can typically be reduced by 20-50% in the case of efficiency improvements in existing energy-using installations and 50-90% in the case of new installations (with respect to the energy use levels of the present average stock of equipment in industrialised countries). These reductions can be achieved by using the most efficient technologies available today and are usually cheaper than increasing supply. In developing countries the potential for demand reduction is often even larger. The potential for further efficiency improvements through continued research and development is high, as the performance of current technologies are far from their fundamental physical limits.

Industry: Significant potential to improve energy efficiency exists in all industries, but particularly in five energy-intensive industries: iron and steel, chemicals, petroleum refining, pulp and paper, and cement, which account for roughly 45% of all industrial energy consumption. Energy typically accounts for a large proportion of production costs in these industries. The introduction of advanced technology to reduce costs, improve product quality, and/or facilitate environmental protection will usually reduce energy requirements as well. Thus, the promotion of technological innovation in these industries will typically lead to substantial gains in energy efficiency. These opportunities are especially important for developing countries where infrastructure-building activities are giving rise to rapid demand growth for basic materials.

Commercial and Residential Buildings: The buildings sector includes a wide variety of specific energy applications such as cooking, space heating and cooling, lighting, food refrigeration and freezing, office equipment and water heating.

Studies estimate the potential savings in energy use from 30-50% in residential buildings for various industrialised countries. In commercial buildings, estimates vary from 25-55% in industrial countries, to up to 50-60% in economies in transition and developing countries. A wide variety of demonstration projects show that even larger reductions in energy use are feasible by a successful combination of currently available technologies in the construction of new buildings.

Transport: Transport energy use can be reduced by: 1) improving the efficiency of transport technology (e.g., improving automobile fuel economy); 2) shifting to less energy-intensive transport modes to achieve the same or similar transport service (e.g., substituting passenger cars with mass transit); 3) changing the mix of fuels used in the transport system; and 4) improving the quality of transportation infrastructure (e.g., roads, railways). See pages 22-23 for a discussion of vehicle technology and fuels.

substantial reductions in energy consumption can be achieved using the most efficient technologies available today and are cheaper than increasing supply

Significant reductions in energy use can be achieved by encouraging shifts to less energy-intensive modes of transport as strong variations in intensities exist for various modes. Shifting commuting from passenger cars to buses can result in a relative intensity drop. This can be achieved through an improved transport infrastructure to increase availability and access and/or by reducing demand. Planners are beginning to examine methods to reduce the demand for transport vehicles, or to optimise the use of existing infrastructure. Policies that encourage large shifts to public transit systems in densely populated areas such as Singapore, Curitiba and Manila have been shown to reduce overall energy demand. The example of Curitiba shows that land-use planning is an important tool to encourage a shift to mass transit.

Agriculture: Energy consumption in agriculture is divided into direct (e.g., tractor fuel, energy for irrigation, crop drying, etc.) and indirect (e.g., fertilisers, pesticides) energy use. It is estimated that only 35% of the total commercial energy utilised in US food production is consumed on the farm. The rest is used in food processing, packaging, storage, transport and preparation.

Potential energy savings can be found through changes in the use and design of tractors, reduced tillage and improvements in irrigation, drying, livestock production, horticulture, and nutrient recycling. Renewable energy sources can also contribute to savings in fossil energy used in agriculture. Examples are solar and wind energy, energy from biomass residues or products from energy cropping for heat and power production, wind as a direct source for irrigation, and solar energy as a direct source for drying.

Material Efficiency Improvement: Decreased use of (primary) materials to manufacture products or perform services will reduce energy use. Reducing material inputs to production can be achieved through more efficient use of materials and closing material chains (i.e., recycling waste and by-products back into the production process). Good housekeeping, material-efficient product design, material substitution or use of materials with improved properties, product and material recycling and decreasing inputs of primary materials all improve material efficiency. Similarly, practices that promote non-recoverable use of materials should be reduced. Reducing material intensity will also have effects on other components in the material chain (e.g., energy savings in transport as well as reduced material demand in providing transport). Eventually such actions will reduce society’s demand for the materials, leading to a structural change within the economy to a lower share of energy/material intensive services.

basic materials production is the most energy intensive so efforts should be made to use these materials efficiently

Recycling material also reduces energy use in the energy-intensive materials industries. Aluminium from recycled scrap reduces specific energy inputs by 90-95%; for iron and steel, the reduction is 60-70%; and for paper, 30-55%.

Macro-economic Impact of Energy Efficiency Measures: A once commonly held, but mistaken, view is that a country’s energy demand is proportional to its gross domestic product (GDP). This is true if, and only if, the structure of the economy and the energy intensities are constant. Thus, the so-called energy-GDP correlation is valid only during periods when there are no changes in the economy’s technical energy efficiency and/or structure. If however, there are changes in energy intensity due to improved efficiency, process or product changes, and/or there are changes in the contributions of different activities to the GDP (e.g., the share of basic materials manufacturing decreases and the share of less-energy intensive activities increases), the proportionality breaks down.

There are three factors responsible for the observed decline of energy intensities in most economies. The first factor is the improved efficiency of production of energy carriers (e.g., an increased number of kilowatt hours of electricity (kWh) generated per tonne of coal burned). The second factor is the improvement of the efficiency of energy end-use technologies - the energy required to perform an energy service (e.g., kWh_e to achieve a certain illumination) or produce a product (e.g., kWh_e per tonne of aluminium) has decreased over the years. The third factor involves structural changes in the use of energy-intensive materials whereby economies become less materials-intensive at higher levels of economic activity, leading to a less energy-intensive economy as a whole. This arises when consumer preferences shift to more valuable, less-materials-intensive products and production shifts to better materials (e.g., through replacement of conventional steels with modern high-strength steels in construction). There have also been declines in energy intensity as a result of a shift from goods production to services production.

By shifting to high-quality energy carriers and by exploiting cost-effective, efficient end-use devices it would be possible to improve living standards without significantly increasing per capita energy use above the present level. For instance, the energy requirements for the West European standard of living of the mid-1970s could be as low as 1 kW/capita, only 20% higher than the 1986 level in developing countries, if state-of-the-art energy-efficient technologies were used.

Conclusions: End-use energy efficiency improvement reduces global warming, air pollution (acid precipitation, smog in the urban and industrial environment), waste production (ash, slag), and water and thermal pollution. End-use efficiency improvement is a cheap energy “source” and, in many cases, far cheaper than new supply. Other economic benefits are reduced costs of energy transformation and generation, reduced fuel imports and increased energy security. Technology developments have neither reached their limits in the provision of continuing improvements to energy efficiency nor will they in the foreseeable future. Large potential exists for energy savings through end-use improved energy efficiency in the buildings, transport and industrial sectors.

The opportunities for improving energy efficiency are far greater with new investments than with retro-fitting existing equipment. These are especially interesting for developing countries because most investments in infrastructure and equipment aimed at economic growth are yet to be made.