IMPACT OF THE ECONOMIC CRISIS ON THE EU’S

INDUSTRIAL ENERGY CONSUMPTION

Francis Altdorfer

ECONOTEC, Belgium

1st December 2017

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Odyssee-Mure webinar series on Energy Efficiency

Organised by Leonardo Energy

KEY QUESTIONS

1. To what extent is the decrease in the EU’s

industrial energy consumption after the economic

crisis due to energy efficiency improvements (as

measured through the ‘unit consumption’ of

industrial branches)?

2. What has been the impact of changes in

production level of industrial branches?

2

METHODOLOGY

• This policy brief analyses the relative importance

of:

– an ‘activity’ effect,

– a ‘structural’ effect,

– a ‘unit consumption’ effect

on the variation of the industrial energy consumption

in the EU since 2007, based on ODYSSEE data

(www.odyssee-mure.eu).

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DECOUPLING OF ENERGY CONSUMPTION FROM

ECONOMIC GROWTH

4

80

85

90

95

100

105

2007 2008 2009 2010 2011 2012 2013 2014

GDP, primary energy consumption and CO2 emissions in EU28 (2007=100)

GDP

Primary energy consumption

Primary energy consumption (with climate correction)

Combustion CO2 emissions

INDUSTRY’S ENERGY CONSUMPTION HAS BEEN THE

MOST AFFECTED BY THE CRISIS

5

75

80

85

90

95

100

105

110

2007 2008 2009 2010 2011 2012 2013 2014

Final energy consumption in EU28 (2007=100)

Industry

Transport

Residential, tertiary and agricultural (with climate correction)

STRUCTURAL EFFECT

ON THE ENERGY CONSUMPTION VARIATION

• Two conditions:

– A diversity of energy intensities (toe/€ of value

added) across branches

– A diversity of activity variation across branches

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STRUCTURAL EFFECT: DIVERSITY OF ENERGY INTENSITIES

7

0

200

400

600

800

1 000

1 200

2007 2008 2009 2010 2011 2012 2013 2014

Final energy intensity in EU28 (toe/M€2005)

Chemical industry Primary metals

Non-metallic minerals Paper and printing industry

Food industry Textile and leather industry

Machinery Transport equipment industry

STRUCTURAL EFFECT: DIVERSITY OF ACTIVITY VARIATION

8

65

70

75

80

85

90

95

100

105

110

2007 2008 2009 2010 2011 2012 2013 2014

Production index by industrial branch in EU28 (2007=100)

Chemical industry Primary metals

Non-metallic minerals Wood industry

Paper and printing industry Food industry

Textile and leather industry Machinery

Transport equipment industry Manufacturing industries

DIVERSITY OF UNIT CONSUMPTION VARIATIONS

9

70

80

90

100

110

120

130

140

150

2007 2008 2009 2010 2011 2012 2013 2014

Unit consumption index by branch for EU28 (2007=100)

Chemical industry Primary metals

Non-metallic minerals Wood industry

Paper and printing industry Food industry

Textile and leather industry Machinery

Transport equipment industry Other industries

BREAKDOWN OF THE VARIATION IN ENERGY

CONSUMPTION SINCE 2007

• Three components:

– Activity effect

• Proportional to the production index of

manufacturing industry as a whole

– Unit consumption effect

• Difference between the observed energy

consumption and the one that would have taken

place had the unit consumption of each branch

stayed at is level of 2007

– Structural effect

• Calculated by difference

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BREAKDOWN OF THE VARIATION IN ENERGY

CONSUMPTION SINCE 2007

– The Structural effect is equal to the variation in

energy consumption that would have taken place

if the unit consumption of each branch had stayed

at its level of 2007, minus the activity effect

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ILLUSTRATION OF THE BREAKDOWN

FOR A SINGLE BRANCH

12

2007 2014

Energy

consumption

0

ILLUSTRATION OF THE BREAKDOWN

FOR A SINGLE BRANCH

13

2007 2014

Energy

consumption

Structural effect

Unit consumption effect

Activity

effect

Energy consumption

variation

0

-20%

-15%

-10%

-5%

0%

2007 2008 2009 2010 2011 2012 2013 2014

Breakdown of the energy consumption variation 2007-

2014 in EU28 manufacturing industry (% of the energy consumption in 2007)

Activity effect Structural effect Unit consumption effect Total

ENERGY CONSUMPTION VARIATION = ACTIVITY EFFECT

+ STRUCTURAL EFFECT + UNIT CONSUMPTION EFFECT

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-20%

-15%

-10%

-5%

0%

2007 2008 2009 2010 2011 2012 2013 2014

Breakdown of the energy consumption variation 2007-

2014 in EU28 manufacturing industry (% of the energy consumption in 2007)

Activity effect Structural effect Unit consumption effect Total

IN 2009 AND 2010, THE DECREASE IN ENERGY

CONSUMPTION IS ESSENTIALLY AN ACTIVITY EFFECT

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-20%

-15%

-10%

-5%

0%

2007 2008 2009 2010 2011 2012 2013 2014

Breakdown of the energy consumption variation 2007-

2014 in EU28 manufacturing industry (% of the energy consumption in 2007)

Activity effect Structural effect Unit consumption effect Total

IN 2011-2014, THE STRUCTURAL AND UNIT EFFECTS

ALSO HAVE A SIGNIFICANT CONTRIBUTION

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OBSERVATIONS

• In 2014, the activity, structural and unit

consumption effects represent a reduction of

respectively 7%, 4% and 6% of the consumption in

2007.

• In absolute terms, this is respectively 22 Mtoe,

12 Mtoe and 18 Mtoe.

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UNIT CONSUMPTION EFFECT

• The unit consumption effect gives an indication of

the level of energy savings (energy efficiency

improvement).

• It comprises not only the impact of energy

efficiency policies but also that of ‘natural’ energy

efficiency improvements (i.e. those due to technical

progress and investments in new equipment).

• However, this indicator remains imperfect, mainly

because of the structural effects taking place inside

each of the branches.

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INTRA-BRANCH STRUCTURAL EFFECTS

Examples:

• Product shifts between energy-intensive and less

energy-intensive products (e.g. in chemical

industry, comprising pharmaceuticals as well as

energy intensive petrochemicals)

• Shifts in types of raw material (e.g. replacement of

clinker by blast furnace slag in the cement industry)

• Process shifts (replacement of oxygen steel with

electric steel)

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INTRA-BRANCH STRUCTURAL EFFECTS

• Some of these structural effects may or may not be

considered as energy savings, depending on the

definition of energy savings.

– Example:

• Replacing oxygen steel with electric steel may be

considered either as an energy saving or a

structural effect.

• These intra-branch structural effects may be either

positive or negative. Hence, energy savings may

be underestimated or overestimated.

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LARGE DISPARITY ACROSS INDIVIDUAL COUNTRIES

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-40%

-20%

0%

20%

40%

EU28 DE FR UK IT ES PL

Breakdown of energy consumption variation 2007-2014

for 6 countries (% of energy consumption of manufacturing industry in 2007)

Activity effect Structural effect Unit consumption effect Total

LARGE DISPARITY ACROSS INDIVIDUAL COUNTRIES

• The 6 countries are the largest energy consumers,

totalling 69% of the total EU28 primary energy

consumption.

• Among these countries, the unit consumption effect

over the 2007-2014 period extends from 0% in

Germany (where there is actually an increase for

‘chemical industry’ and ‘wood industry’) up to -31%

in Poland.

• The structural effect ranges from +2 % in Italy to -

11 % in Poland for the same period.

• The activity effect reaches +31% in Poland.

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BREAKDOWN BY

BRANCH

Breakdown of the EU28

energy consumption

variation 2007-2014 by

branch (% of energy

consumption of

manufacturing industry

in 2007)

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-20% -15% -10% -5% 0% 5%

Chemical industry

Primary metals

Non-metallic minerals

Wood industry

Paper and printing

Food industry

Textile and leather

Machinery

Transport equipment

Other industries

Manufacturing industry

Activity effect Structural effect Unit consumption effect Total

BREAKDOWN BY BRANCH

• The structural effect is mainly due to ‘non-metallic

minerals’ (-3.0%) and ‘primary metals’ (-2.1%), and

is partly compensated by ‘chemical industry’

(+2.3%).

• The unit consumption effect is mainly due to the

chemical industry.

N.B.: for a same branch, energy savings in countries

with a negative unit consumption effect may be

hidden by increases in unit consumption (due to a

shift in products for example) in other countries.

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CONCLUDING REMARKS

• The analysis, for EU28, tends to show that:

– The reduction in industrial energy consumption in

2009-2010 can almost entirely be attributed to the

decline in production.

– The later evolution of energy consumption is due not

only to industrial activity, but also to a reduction in

branch unit consumptions (a proxy for energy

efficiency improvement) and to a structural effect (a

smaller weight of energy intensive branches), hence

a decoupling of energy consumption from activity.

– Significant disparities do exist across branches and

countries.25

THANK YOU FOR YOUR ATTENTION

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• For further information: www.odyssee-mure.eu

• Contact: francis.altdorfer@econotec.be