FEATURED | Improving Energy Efficiency in Asia

Many indicators can be used to measure energy efficiency. One is energy intensity, or the ratio of energy consumption to gross domestic product (GDP) or some other economic indicator. It is commonly used as proxy or headline indicator for energy efficiency: a decreasing ratio is seen as an improvement, and an increasing ratio, a deterioration, over a period of time.

By Asian Development Bank

Image Attribute:  Wind turbines. Author: Ville-Matti Kaartinen. License: Creative Commons, Attribution-NoDerivs 2.0 Generic.

Energy efficiency is defined as the “ratio between the useful output of the end-use service and the associated energy input” (World Bank and IEA 2014). The IEA (2014b) defines it as the relationship between the energy requirements of a certain device (for example, a light bulb, boiler, or motor) and the service that the technology provides (for example, lighting, space heating, or motor power). In other words, energy efficiency can be equated with delivering more services for the same energy input, or delivering the same services for less energy input. It can be achieved through better performance, the use of more energy-efficient equipment, or a change in consumer habits. The experience of many countries in Asia and the Pacific provides the economic case for achieving this goal. In the PRC and India, for example, energy efficiency initiatives have reduced energy intensity and resulted in energy savings (ADB 2013b). Energy efficiency is also an important enabler for energy access. Greater efficiency frees up resources to expand the reach of energy, lowers the cost of energy for consumers, and creates a surplus that allows more energy to be used for productive undertakings.

Many indicators can be used to measure energy efficiency. One is energy intensity, or the ratio of energy consumption to gross domestic product (GDP) or some other economic indicator. It is commonly used as proxy or headline indicator for energy efficiency: a decreasing ratio is seen as an improvement, and an increasing ratio, a deterioration, over a period of time. Among the top contributors of primary energy demand in developing Asia and the Pacific, energy intensities have been decreasing—if not decelerating in compounded annual growth rate, as in Thailand—since 1990, and especially in the most recent years (Figure 1). The top four countries—the PRC, India, Indonesia, and Thailand—are likewise classified as high-impact countries under the Global Tracking Framework (GTF), given their significant contribution to global primary energy demand, and could thus affect the achievement of the global SE4All objectives.

Figure 1: Primary Energy Intensity among the Top 10 Primary Energy Consumers, 1990–2012 (%)

Worth noting, however, are the limitations of primary energy intensity as a proxy indicator. Economic sectors have different processes and therefore also varying energy requirements, but the differences are lost in the process of using an economic indicator as large as GDP. This fact is widely recognized in the literature, hence the move to keep indicators as dis-aggregated as possible. Given the complexity of sector-specific characteristics, comparison across countries might be challenging, especially as countries also have varying sectors and services. Moreover, the ratio’s movement across time could be attributed to the many factors influencing both the numerator (energy demand) and the denominator (GDP).

To address some of the indicator’s limitations, energy efficiency can be measured through the decomposition method of analysis. This method isolates the energy efficiency component from other factors affecting energy demand, such as economic structure and economic activity. The Logarithmic Mean Divisia Index (LMDI) was used under the GTF to net out the energy intensity factor, which accounted for the contribution of energy efficiency improvements to the reduction in energy demand, indexed to the base year 1990. The GTF computations show deteriorating energy efficiency in recent years in some of the countries with the highest energy demand (Figure 2), as evidenced by the positive compounded annual growth rates for energy intensity between 2010 and 2012. The PRC, Indonesia, and Malaysia, on the other hand, have consistently improved their energy efficiency since 1990.

Figure 2:  Energy Intensity Component of Final Energy Demand among the Top 10 Energy Consumers, 1990–2012 (%)

The decomposed energy intensity index derived from the LMDI was also used in computing the cumulative avoided energy consumption, which represented the difference between hypothetical energy consumption—energy intensity remaining at its 1990 level—and actual consumption. GTF data showed that the PRC, the top consumer of energy, produced the highest cumulative savings from 1990 to 2012, at 867,500 exajoules as a result of its continuous improvements in energy efficiency (Figure 3).

Figure 3: Cumulative Avoided Energy Consumption of Top 10 Energy Consumers, 1991–2012 (’000 exajoules)

Another useful indicator is the ratio of final energy consumption to primary energy consumption, which measures overall energy conversion efficiency. A higher ratio represents lower energy conversion and transmission losses. In countries where primary energy is mostly used directly to meet final energy demand, efficiency will be relatively higher. With 2012 data from the IEA’s non-OECD energy balances, the ratio was computed for developing members in Asia and the Pacific. Nepal took the lead, at 98.9%, followed by Myanmar with 94.7% (Figure 4). Caution should, however, be observed in comparing across countries as the indicator is influenced by resource endowment factors.[1] A higher ratio for a country does not imply that its overall energy system efficiency is better than that of other countries.

Figure 4: Ratio of Final Energy Consumption to Primary Energy Consumption of Selected Asia and the Pacific Developing Members, 2012 (%)

Publication Details:

This article is an excerpt from a technical report titled - SUSTAINABLE ENERGY FOR ALL TRACKING PROGRESS IN ASIA AND THE PACIFIC: A SUMMARY REPORT / Download The Report - PDF

ADB Team. 2015. SUSTAINABLE ENERGY FOR ALL TRACKING PROGRESS IN ASIA AND THE PACIFIC: A SUMMARY REPORT

© Asian Development Bank https://openaccess.adb.org. Available under a CC BY 3.0 IGO license.

Endnote:

[1] According to the GTF, primary energy and final energy will be more directly related in a country with a significant hydroelectric sector. In a country rich in geothermal energy, on the other hand, the ratio of final energy consumption to primary energy consumption will be lower because of the low thermodynamic quality of the primary resource (World Bank and IEA 2014)