Energy Intensity Indicators: Caveats and Cautions

This web site contains a diverse collection of indicators that track changes in energy intensity at the national and end-use sector levels (after taking into account other explanatory factors). Indicators are based on readily available and publicly accessible data, although some of this data has been interpolated between published years, or extrapolated beyond the last published year. To help facilitate the appropriate interpretation, this page provides some discussion of data issues and of issues related to the treatment of other explanatory factors. There is additional discussion of caveats and cautions in the Methodology paper and within the documentation for the Data.

Interpretation of Energy Intensity Indicators

The major reason for the development of this national system of indicators of energy intensity is to provide an understandable, readily available, and transparent measure of the performance of the economy with regard to its use of energy. The intent is to update this system of indicators on a periodic basis and make the data readily available to the public and to analysts. The purpose of developing a new index of energy intensity is to have it reflect, as closely as possible, improvements in energy efficiency. This can only be accomplished if other explanatory factors — things that would normally affect the energy-intensity index, but do not reflect improvements in energy efficiency — are taken into account. These other explanatory factors are often referred to as structural and behavioral components or effects, to differentiate them from underlying improvements in the use of energy. So in addition to looking at energy intensity, this system of indicators also tracks the important structural changes that affect the use of energy.

In the construction of this system of indicators, a number of issues have been addressed, but these issues need to be highlighted to the user, because they may affect any conclusions that are drawn from the indicators. These issues can be grouped under the following headings:

Data Issues. Because all data are not collected every year, annual updating of the system of indicators requires that data that are not inherently annual be extrapolated. The documentation of data sources provides a description of how these interpolations were done, which are subject to analytical judgment, rather than scientific certainty. The intent is to revise the system of indicators as missing pieces of data are published, so that extrapolated data are more closely matched to published data over time. The following items are of special note:

  • Transportation Energy: Data for the transportation sector are generally available through 2003, but are not complete through 2004. Missing items for 2004 have been assigned the same value for 2003 or upon an extrapolation of recent growth rates. The nature of the missing data is not likely to have a significant effect on the aggregate transportation indicators.
  • Industrial Energy: The next EIA Manufacturing Energy Consumption Survey (MECS) will be released late in 2008 for the survey year 2006. At about the same time, Annual Survey of Manufacturers (ASM) data will also be released. While the manufacturing data have been benchmarked to energy use through 2002, the data through 2004 are extrapolated based on the ASM. At the aggregate level, there is enough consistency of change to the structural components that we have extrapolated these numbers with enough confidence to be able to construct the aggregate indexes with confidence, based on EIA published aggregates. Our expectation is to update these numbers for manufacturing with the release of the 2006 MECS.
  • Residential Building Energy: A major effort has gone into teasing out the impact of weather on consumption of natural gas for households. The results of this effort are reported in a paper that is available on this site; see the Methodology section.
  • Commercial Building Energy: There is a significant diversion between the aggregate commercial buildings sector data, as published in the EIA Annual Energy Review, and the sector details, as published in the end-use survey, EIA Commercial Building Energy Consumption Survey (CBECS) that prevents us from confidently developing much commercial sub-sector detail for the web site at this time.

Issues Related to Other Explanatory Factors. Although the system of indicators tracks energy intensity over time, it also identifies and isolates other changes that are going on in the economy that have no bearing on the efficiency with which energy is used. These changes are referred to as structural changes. These structural elements give rise to a change in energy use per unit measure of output, but do not reflect improvements in the underlying efficiency of energy use. For example, the electronics industry may grow much faster than the steel industry over time, and since electronics are substantially less energy intensive than steel, this growth creates the impression that the manufacturing sector is less energy intensive than before.

For the intensity index to better reflect the efficiency of manufacturing energy use, there is a need to normalize the intensity measure so that these differential growth rates are taken into account. Structural changes occur in each of the energy-using sectors of the economy, but they are quite different from one sector to another. For example, a transportation indicator constructed for that end-use sector will have a different interpretation than one constructed at the sub-sector level, or one constructed for another end-use sector. A method of index construction has been chosen so that these structural changes can be aggregated from the bottom up, and integrated into the overall index, whether the index is at the end-use sector level (i.e., freight and passenger transport in the transportation sector) or at the aggregate, economy-wide level. A further discussion of how this is accomplished is available in the Methodology section.

Methodological Issues. The construction of indices that show the performance of energy intensity over time and account for structural changes is an exercise in decomposition of effects. Advances have been made recently that allow for this decomposition so that many of the attributes of an "ideal index" are captured in the decomposition used here. One of these attributes is "perfect aggregation," which allows all higher level indexes to be constructed so that they include all the information available at the lower levels, and allows this information to be integrated at the higher level. Unfortunately, that attribute distorts the activity measure in a way that would make these measures deviate from published figures, so the approach used to construct intensity indices for this web site was modified to allow almost perfect aggregation and yet have the activity measures conform to the published numbers. A thorough discussion of the methods used for the construction of the indexes is given in the Methodology and Trend Data sections.