Energy Intensity Indicators: Overview of Concepts

The Energy Intensity Indicators website reports changes in energy intensity in the United States since 1970. The website discusses, and presents data for, energy intensity trends by major end-use sectors, associated subsector for the economy as whole (economywide). Following the conventions used by the Department of Energy's Energy Information Administration, the four major end-use sectors are 1) residential, 2) commercial, 3) industrial, and 4) transportation. Further disaggregation of these major sectors is made, dependent upon the availability of consistent historical data. See Coverage for details.

Energy intensity is measured by the quantity of energy required per unit output or activity, so that using less energy to produce a product reduces the intensity. Energy intensity trends are developed for three broad definitions of energy: 1) delivered, 2) source, and 3) source, adjusted for changes in the energy efficiency of electricity generation. These definitions are summarized briefly below (with further discussion on the Terminology and Definitions page).

Delivered energy is the amount of energy consumed at the point of sale (e.g., that enters the home, building, or establishment) without adjustment for energy loss in the generation, transmission, and distribution of energy. This is primary energy for the four end-use sectors plus electricity sales. Delivered energy is sometimes referred to as "site" energy.

Source energy consumption is the amount of fossils and renewables by an end-use sector, plus the electricity used by that sector (electricity sales). In addition, the losses associated with the production of electricity by the utility sector (i.e., losses that occur in the generation, transmission, and distribution) are also allocated to the end-use sector. The sum of total energy for four end-use sectors (transportation, industrial, residential buildings, and commercial buildings) is equal to the sum of all primary energy consumed by the four sectors plus energy consumed by the electricity producing sector.

An issue with the use of source energy is that both improvements in energy efficiency in the consuming sector, as well as improvements in the generation of electricity, can affect the trend in energy intensity. To account for changes in electricity generation efficiency, an alternative concept of source energy is employed, one that effectively holds the energy intensity in the electric utility sector (ratio of losses to sales to end users) constant. In the system of intensity indicators, an index consistent with this definition is typically termed an "adjusted source energy intensity index." (Note: Typically, no measures of "adjusted source energy" are explicitly computed. Rather, the adjustment is applied implicitly in the mathematical formulation of the energy intensity index. To better understand this distinction, refer to Section 2.6 in the 2014 Comprehensive Report.)

Most of the presentation of energy intensity trends on this site is based upon this third definition of energy, where both the magnitude and changes in energy losses in the generation of electricity are included in the intensity indexes for the major end-use sectors. However, intensity indexes based upon delivered and (unadjusted) source energy are available from the downloadable spreadsheets for each major end-use sector.

The energy intensity indicators control for structural changes in the economy that are not directly associated with energy efficiency improvement. This gives a truer measure of intensity change associated with energy efficiency improvement than the simple energy/GDP or a simple energy/activity ratio. Examples of structural changes include shifts from more energy-intensive industries, such as iron and steel, to industries that are less energy-intensive, such as computer manufacture, or shifts from passenger automobiles to SUVs or light trucks.

The EERE system energy intensity indicators uses what is termed the log mean Divisia index (LMDI) method to decompose changes in energy use (and energy intensities) for aggregate sectors into separate indexes for energy intensity and other indexes that represent various types of structural factors. In broadest terms, the LDMI method is used to decompose energy consumption at any level of aggregation into three major components, all expressed as indexes relative to a selected base year and satisfying the following relationship:

Energy (index) = Activity (index) x Energy Intensity (index) x Structure (index)

When combining the intensity indexes from two or more different activities, the shares of energy consumption (with slight adjustment) serve as weights in calculating a weighted average of year-to-year changes in the intensities for the various activities. The same set of weights is used to develop the index related to structure, only in this case the weights are applied to the (year-to-year changes in) shares of activity related to the different activities (e.g., the shares of ton-miles of freight carried by trucks or rail). The resulting weighted-average (aggregate) year-to-year changes (expressed as changes in the logarithms) are then cumulated over time to develop a time series index. This manner of construction of the various LDMI indexes has the desirable property that the percentage change between any two time periods is not dependent on the choice of a base period for the entire index. Further discussion of the Divisia index methodology can be found in several publications accessible from the methodology page (with the most detailed discussion in the 2014 Comprehensive Report).