Economic Concept of Energy Efficiency

Though energy efficiency is traditionally defined in terms of two basically reciprocal indicators, as energy intensity (energy use per unit of activity output), and as energy productivity (activity output per unit of energy input), the concept is a context-specific one, not necessarily equivalent to energy savings, and is usually defined as net benefits (useful output) per unit of energy use, but without an unequivocal operationally useful quantitative measure. This necessitates construction of a series of indicators specific to the context (or level of sectoral disaggregation). It is generally believed that energy consumption is essentially determined by three effects, viz., activity, referring to economic or human activity level (output/income produced, population/households supported, passenger-km travelled, etc), structure referring to the composition of activity (shares of different sectors or subsectors of human/economic activities) and energy intensity, the quantum of energy required to deliver one unit of economic/human activity. The exact definitions and units of these factors are in turn determined by the level of aggregation. The present paper documents the definitions and units of these three effects.