In these days of heightened awareness about global warming and factors that impact the planet adversely, one of the key terms you would have seen used in the news is ‘energy intensity’. What exactly is energy intensity? Broadly, it is a measure of the energy efficiency of a nation’s economy and is generally defined as the number of units of energy per unit of GDP. So, high energy intensity indicates a higher price of converting energy into GDP and vice versa.
Many factors influence an economy’s overall energy efficiency. It reflects general standard of living and weather conditions. It is common for particularly cold or hot climates to require higher energy for heating and cooling respectively. Generally, a nation that is highly economically productive, with mild and temperate weather will have lower energy intensity than a nation that is less productive with extreme weather conditions.
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. On the contrary, energy intensity indicates an economy’s capability to produce products with less energy use. 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.
An inverse way of looking at the issue would be an 'economic energy efficiency,' or economic rate of return on its consumption of energy: how many economic units of GDP are produced by the consumption of units of energy.
In India, today the energy requirements are in the range of 450-500 m MTOE (1 Metric Tonnes of Oil Equivalent = 11630 KWh). I cannot guarantee the correctness of these numbers as they would be probably a bit different. But the overall message is not affected by it. This requirement is expected to grow in next 20 years to triple this value and is estimated at 1500 m MTOE. If the economy also has to grow at 8+ % GDP, then it is imperative that that energy intensity should reduce. Today, the energy intensity in India is around 0.02 Kg of oil equivalent per Rupee of GDP. In the absence of focus on reducing energy intensity, in the ‘business-as-usual’ scenario, the reduction is only expected to be around 0.018 (compared to 0.02) in next 20 years. But it can be significantly reduced to around 0.010 in the same time period if India resorts to some hybrid high-growth, high-efficiency scenario.
India has pledged to reduce energy intensity by 20% in next 10 years. To achieve this target, India has announced the Perform, Achieve and Trade (PAT) scheme under the National Mission for Enhanced Energy Efficiency (NMEEE) programme. Sectors that consume maximum energy will be assigned efficiency targets in April. The aim is to save 10 million tonnes of oil equivalent (mtoe) by 2014. NMEEE is a part of the National Action Plan on Climate Change (NAPCC) launched in June 2008. Just how effective the scheme will be, will have to be seen, as it is expected that the targets are too soft to achieve the ambitious reduction in energy intensity trends India has promised at international fora.
Just to leave you with a thought. It is interesting to look at where and how countries get placed and bracketed with in a GDP vs energy efficiency graph. India is fairly low productive country at around 3000 USD GDP per capita (yes despite the recent growth) compared to the US, Hong Kong, Canada and Australia whose GDP per capita is in excess of 30,000 USD. Energy use however is moderately higher at around 250 USD (GDP per Million Btu) compared to the highly efficient economies like the Phillipines and Bangladesh (at 500 USD). The US and other highly productive countries are known to be quite energy efficient. So India is neither yet fully developed (in terms of GDP per capita) nor is energy efficient and has got bracketed with the likes of Viet Nam and Pakistan. Surely, India’s challenges are varied considering the size, population, geography and climate. The challenge remains and something to watch out for as to how India, once committed, would like to meet its energy intensity reduction targets while maintaining growth.
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