Energy Efficiency Indicators: Estimation Methods

Traditionally, there are two basically reciprocal energy efficiency indicators: one, in terms of energy intensity, that is, energy use per unit of activity output, and the other, in terms of energy productivity, that is, activity output per unit of energy use. A number of approaches characterize the efforts to measure these indicators. The present paper attempts at a a comprehensive documentation of some of the analytical methods of such measurement. We start with a comprehensive list of the estimation methods of energy productivity indicators. Note that the methods fall under three heads: traditional single factor productivity analysis, decomposition analysis and multi-factor productivity analysis. The paper takes up each of these in detail, starting with the traditional indicators identified by Patterson to monitor changes in energy efficiency in terms of thermodynamic, physical-thermodynamic, economic-thermodynamic and economic indicators. When we analyze the indicator in terms of energy intensity changes, the corresponding index falls under two major decomposition methods, namely, structural decomposition analysis and index decomposition analysis. The structural decomposition analysis is discussed in terms of its two approaches, viz., input-output method and neo-classical production function method; and the index decomposition analysis in terms of Laspeyres’ and Divisia indices. In the multi-factor productivity approach, we consider the parametric and non-parametric methods, viz., stochastic frontier model and data envelopment analysis respectively.