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2. Defining Energy Efficiency and Its Measurement

The vast size and complexity of the U.S. economy makes consistent, meaningful, and understandable measurement of any broad-based characteristic a daunting task. Energy efficiency is no exception.

Concept of Energy Efficiency

The words "energy efficient" and "energy efficiency" are in common use qualitatively, but are difficult to define or even to conceptualize. The definition of "energy efficiency" seems to be philosophical in nature. An engineer may define energy efficiency in a very restrictive equipment sense, whereas an environmentalist may have a more broad view of energy efficiency. An economist, politician, sociologist, etc., may each have a different concept of energy efficiency.

This report, puts forth two concepts of energy efficiency, a technical concept and a more broad, subjective concept. Often the words "energy efficiency" have been used to describe what actually may be conservation. For example, consider an office building that post signs, "BE MORE ENERGY EFFICIENT--USE THE STAIRS INSTEAD OF THE ELEVATOR." If people heed the sign and take the stairs instead of the elevators, is this an increase in energy efficiency? Less energy is used, but services are reduced. Behavior has changed, leading to reductions in energy use. People with a social view of energy efficiency might consider the energy savings to be an efficiency gain, while those with a more technical view of efficiency would classify the savings as conservation rather than efficiency improvement.

Consider another example: A household undertakes measures such as adding storm doors, high-efficiency light bulbs, and attic insulation. At the same time, in the winter the household raises the thermostat and leaves the lights on for longer periods, using the same amount of energy it used previously. Has this household improved its energy-use efficiency? In a very restrictive technical sense, yes. The household is receiving higher levels of services (warmer interior) for the same energy input, and the individual services are being performed with less energy intensity (fewer watts per lumen and fewer Btu per degree temperature rise). According to an outcome-based concept, however, energy efficiency is not affected unless the higher temperatures and longer lighting hours meet additional household needs. (Box 2.1a)

Energy efficiency in a more subjective sense may refer to the relative thrift or extravagance with which energy inputs are used to provide services (Box 2.1b). Energy services encompass a myriad of activities, such as powering a vehicle or a toaster, firing a boiler, cooling an office, or lighting a parking lot. To be energy efficient per se is to provide services with an energy input that is small relative to a fixed standard or normal input.

Box 2.1.
Energy-Efficiency Concepts

a. Increases in energy efficiency take place when either energy inputs are reduced for a given level of service or there are increased or enhanced services for a given amount of energy inputs.

b. Energy efficiency is the relative thrift or extravagance with which energy inputs are used to provide goods or services.

The terms "energy efficiency" and "energy efficient" are used in conjunction with other terms such as "energy-intensity" or "energy intensive" in describing the mathematical relationship between energy use and service output. Box 2.2 depicts the basic equation relating the energy use and service output relationship. The intensity component, the energy use rate, is the commonly used basis for measuring and assessing efficiency since measurement of any narrow technological definition of energy efficiency is not feasible (Box 2.3). Intensity and efficiency are not related, in an absolute sense, across energy services. Just because more energy is required to heat a ton of steel than to cook a hot dog, cooking a hot dog is not a more efficient process—it simply has smaller unit energy requirements, i.e., is less energy intensive.

Box 2.2.
Relationship Between Energy Use and Service Output
Cs = Is * Qs


Cs = Energy consumption giving service s,

Is = Intensity of energy use per service unit (or demand indicator), and

Qs = Measure of the total requirement for service s.

Box 2.3.

Energy Intensity

Energy intensity is the ratio of energy consumption to a unit of measurement (e.g., floorspace, households, number of workers, etc.)

However, to the extent that the intensity measure is perceived as a use rate that reflects efficiency, intensity is inversely related to efficiency for a given service; that is, the less energy required to perform a given service, the greater the efficiency. It follows that a decrease in energy-intensity over time may correspond to an increase in energy efficiency depending on the level of other structural and behavioral effects.1

Measuring Energy Efficiency

Change in energy use over time is driven by a combination of efficiency, weather, behavioral, and structural effects that may be only partially separable and may differ among energy services. Therefore, the task of measuring and assessing energy efficiency and its change over time consists of the following:

Deciding which effects should be considered as inherent in efficiency measurement and which are due to weather, behavioral, and structural changes to be eliminated or, at least, recognized in the measurements

Creating an appropriate categorization of energy services that provides the best possible framework of efficiency measures

Combining these statistical measures into a meaningful and understandable assessment of energy efficiency and its trends.

There are two approaches to address energy-efficiency trends:

Market Basket. The market-basket approach is based on consistent measures of consumption per service unit for a benchmark set of energy services.

Comprehensive Approach. The comprehensive approach attempts to take all energy use into account.

Market-Basket Approach

This approach is comparable to the procedure for computing the Index of Industrial Production. The approach estimates energy-consumption trends for a controlled set of energy services (the market basket) with individual categories of energy services controlled relative to their share in the index. This method of indexing is a type of "bottom-up" approach. If a market-basket approach is used, the energy service for which efficiency is measured should encompass the broadest range of services.2

 Limitations of the Market-Basket Approach

The overriding problem may be a lack of efficiency measures for certain classes of services and the nature of the available efficiency measures. Some of the measures may be special-purpose, specific to certain brands or population subclasses, often derived in test conditions rather than actual use, and produced without a firm plan for periodic updates. With new ways of delivering energy services appearing frequently, problems with keeping current can interfere with trend measurements. Additionally, there is a problem with consumer product substitution. If prices change, consumers have a tendency to substitute another comparable product.

Comprehensive Approach

The comprehensive approach starts the measurement process with the broadest available measures of energy use and demand indicators available (Box 2.4). Over time, changes in such measures reflect changes in behavior, weather, structure, and energy efficiency. In order to be a viable for assessing energy efficiency, structures of energy measures need to be produced that it is possible to separate the effects unrelated to energy efficiency. This approach can be thought of as a "top-down" approach. It is like peeling away all the effects until energy efficiency is all that remains.

Box 2.4.

Energy Consumption

Energy consumption used in the intensity indicator can either be primary energy or site energy.

Primary energy is the amount of energy delivered to an end user (e.g., residential housing unit) adjusted to account for the energy that is lost in the generation, transmission, or distribution of the energy.

Site Energy is the amount of energy delivered to an end user that is not adjusted to account for the energy lost in the generation, transmission, and distribution of the energy. 

Demand Indicator

A Demand Indicator is a measure of the number of energy-consuming units, or the amount of service or output, for which energy inputs are required.

The measurement of the energy efficiency in the U.S. economy or even just sectors of the U.S. economy is beyond the scope of currently available data, EIA or otherwise. This being said, the broader measure, energy intensity, which includes both the narrowly defined efficiency changes as well as some behavioral and structural changes that cannot be totally separated given currently available data, is still of interest. A "good" measure of energy intensity should identify (or remove from the measure) as many of the behavioral and structural changes that affect energy intensity, but are generally agreed to be unrelated to energy efficiency, as is computationally feasible within budges limitations and data availability.

 Limitations of the Comprehensive Approach

Increased service detail provides an increased understanding of and more precise control over the concept of efficiency being measured. At the same time that energy intensities associated with energy services are changing, the amount and nature of service demands are also changing. Deciding which change should be embodied in measuring energy-efficiency change is a critical and potentially controversial subject.

Using energy-intensity as the indicator of energy efficiency and separating those changes that are not changes in energy efficiency (e.g., weather) requires service detail in both the numerator (energy consumption) and denominator (demand indicator). It is impossible to extricate all weather, structural, and behavioral changes from efficiency assessment using the comprehensive approach. Some economic sectors have poor or nonexistent information on energy use and/or characteristics associated with energy use.

Approach Used in this Report

This report uses the comprehensive approach. The categorization of energy-using sectors and the discussion of energy consumption and demand indicators as they are related to energy intensities will originate largely from EIA's end-use consumption surveys (Box 2.5). There are many other data sources, originating both within and outside of EIA, that also are used as tools for this analysis. Some data, such as information from the Department of Transportation, are of considerable use in deriving energy-intensity indicators for particular energy-service categories that are not covered by consumption surveys or are covered in insufficient detail.

Box 2.5.

Energy Information Administration End-Use Consumption Surveys


Cover broad, well-defined subsets of the U.S. economy that are delineated by their energy needs and use patterns

Representative of the entire United States

Measure actual energy use, rather than examples of use under test conditions or other special circumstances

Measure use of major energy sources for most purposes within the sector

Provide information on the ways in which energy is used, characteristics of the users, and energy consumption

Statistical methods have been/are being developed to partition energy use from these surveys into service categories, e.g., space heating.

EIA's consumption surveys are triennial data collections that presently cover four sectors: residential households, residential personal-use vehicles, commercial buildings, and manufacturing establishments. They are designed to provide information on energy consumption and expenditures and on characteristics of the energy-consuming units that affect energy use.

There are other more rigorous approaches than the one used in this report. The U.S. Department of Energy’s Office of Policy in April 1995, released the report, Energy Conservation Trends (DOE/PO-0034). This report uses the Divisia approach, which mathematically decomposes any time trend as a product of component elements.3  EIA’s consumption surveys are relatively new and therefore time trend data based on these surveys are not available at this time. Additionally, formal econometrics and statistical analysis were not employed since the time trend data from the surveys were limited and budget limitations did not permit a more rigorous approach at this time.

End Notes         

1Structural and behavioral effects could mitigate any improvements in energy efficiency, resulting in actual increases in the energy-intensity indicator.

2For further information see "Quantity Index" in the economy section of Appendix A.

3For additional information comparing the Divisia and other methods, see Boyd G.A., D.A. Hanson, and T. Stemer (October 1988), "Decomposition of Changes in Energy Intensity: A Comparison of Divisia Index and Other Methods," Energy Economics, pp. 309-312. Another sources is Howardth, R.B., L. Schipper, P.A. Duerr, and S. Strom, (April 1991) "Manufacturing Energy Use in Eight OECD Countries," Energy Economics, pp. 135-142.

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File Last Modified: October 17, 1999