Decoupling efficiency from electricity intensity: An empirical assessment in the EU

Abstract

A naive analysis of electricity intensity is not very informative since deviations in this indicator entail the consequences of changes in its components. The objective of this paper is to address these components, decomposing the electricity intensity in the European Union from 1995 to 2019. Complementing the LMDI method (Ang, 2015), this paper proposes an improvement by adding a new element to the decomposition methodology. Subsequently, three components of electricity intensity are explored: structure, efficiency, and electrification. This enhancing innovative feature is fundamental to distinguish the actual influence of energy efficiency on electricity intensity from that of the other elements. Results demonstrated that the efficiency component impact was greater than it first appeared. As the goals of public policies such as 20-20-20 EU have been intensified, policy makers need to keep promoting technological innovations since the relevant contribution of the efficiency component was supported by reasonable evidence and the adopted strategies have generated solid results regarding the electricity intensity indicator. Also, the structural element displayed minor influence, although the economic activity profile of the EU has changed. Additionally, the electrification component contributed to increase electricity intensity, since the electricity consumption has grown at a higher rate than the output of the economy. As values were distinct between the EU-28 countries and each one has its particularity that influences the electricity intensity, a country-specific efficiency policy could also be considered.