ENERGY INTENSITY

Introduction
All Industries
Agriculture, Forestry and Fishing
Mining
Manufacturing
Water Supply and Waste Services
Construction
Transport
Commercial and Services

INTRODUCTION

The energy intensity of an industry is a measure of the energy consumed to produce one unit of economic output. The principal unit used in the following graphs and commentary for each industry is gigajoules of energy consumed per million dollars of Industry Gross Value Added (GJ/$m IGVA). A high energy intensity figure does not necessarily imply that an industry is using energy inefficiently. By their nature, most industries engaged in physical transformation of raw materials will use more energy than service industries.

Historically, energy intensity levels have generally fallen over time. However, falling energy intensity in an economy or industry may be attributable to factors other than more efficient use of energy arising from technological improvements and/or energy price rises. At an economy wide level, it may indicate structural shifts in the economy for example an economy moving from predominantly manufacturing activities to predominantly services. Within industries, a shift in emphasis from, say, light manufacturing to heavy industry, such as from fabrication to basic metals manufacturing, may increase energy intensity.

This chapter examines the energy intensity over 30 years to 2008–09 of the following industries:

• Agriculture, Forestry and Fishing
• Mining
• Manufacturing
• Construction
• Transport
• Water Supply and Waste Services; and
• Commercial and Services

Commercial and Services corresponds to a broad grouping of thirteen ANZSIC division level service industries. These industries have been grouped together because the energy consumption of each individually is relatively small and ABARES' statistical coverage of such industries is not as detailed as for the other industries. Commercial and Services corresponds to the grouping of the same name used in ABARES' Australian Energy Statistics and consists of the following ANZSIC divisions:

• Wholesale Trade
• Retail Trade
• Accommodation and Food Services
• Information Media and Telecommunications
• Financial and Insurance Services
• Rental, Hiring and Real Estate Services
• Professional, Scientific and Technical Services
• Administrative and Support Services
• Public Administration and Safety
• Education and Training
• Health Care and Social Assistance
• Arts and Recreation Services
• Other Services

The following analysis is based on the ratios of physical energy consumption statistics compiled by ABARES to industry gross value added (IGVA) data compiled by the ABS. Consumption data are based on Table F of ABARES' Australian Energy Statistics. ABS industry gross value added is from the Australian System of National Accounts (ASNA) and is based on the Australian and New Zealand Standard Industrial Classification (ANZSIC 2006). Due to recent revisions in ASNA, timeseries data has been adjusted based on the latest IGVA data. For further information on the revisions to ASNA and IGVA see Information Paper: Implementation of new international statistical standards in ABS National and International Accounts.

Whilst ABARES' physical use statistics follow a similar classification system, consumption of transport fuels (petrol, diesel and LPG) is assigned on the basis of activity type, as opposed to industry of ownership. An important aspect of the energy account has been the reallocation of transport fuel use onto an industry of ownership basis. This has resulted in a significantly different view of physical fuel use by industry and households. For a fuller explanation of the methodology, refer to Methodological Issues.

The principal unit used in this analysis is gigajoules (GJ) of energy. A gigajoule is roughly equivalent to the energy content of 29 litres of petrol or 280 kilowatt hours of electricity. The energy supply and use data presented in earlier chapters are in petajoules (PJ). A petajoule equates to one million gigajoules, and PJs are typically used to measure national or industry energy production and consumption.
ALL INDUSTRIES



Energy consumption for all industries (excluding the electricity and gas supply subdivisions) grew 69% from 1,753 PJ in 1978-79 to 2,960 PJ in 2008-09. Over the same period, IGVA increased by 179%, from $381 billion to $1,064 billion. This resulted in energy intensity falling 40% from 4,603 to 2,782 GJ/$m IGVA.
AGRICULTURE, FORESTRY AND FISHING

Energy consumption in Agriculture, Forestry and Fishing grew from 48 PJ in 1978–79 to 104 PJ in 2008–09, an increase of 115%. Over the same period, IGVA for Agriculture, Forestry and Fishing grew from $15.5 billion to $27.7 billion, an increase of 79%. This resulted in an overall increase in Agriculture, Forestry and Fishing energy intensity of 20% over the period.

The increases in energy intensity in 2002–03 and 2006­07 coincided with severe drought conditions (Coughlan et al. 2003; MDBA 2009), which caused major declines in the volume (ABARES 2010a) and value (ABS 2004; ABS 2008c) of grain crops production. Agriculture, Forestry and Fishing IGVA in 2002–03 fell 21% (from the previous year) and in 2006–07 it fell 15%. Despite this, energy consumption by the agriculture industry actually increased by 10% in 2002–03, and fell by only 1% (relative to 2005–06) in 2006–07. Unlike some industries, agricultural energy consumption and output are not closely coupled. Major shifts in weather conditions and prices can impact significantly on Agriculture, Forestry and Fishing IGVA, obscuring long term trends in energy intensity.
MINING


In contrast to other industries, energy intensity in Mining increased in most years and, overall, increased by 79% to 4,191 GJ/$m IGVA in 2008–09. Energy consumption in mining grew very strongly from 83 PJ in 1978–79 to 480 PJ in 2008–09, an increase of 479%. Over the same period, IGVA grew by 223% from $35.4 billion to $114.5 billion.

A number of factors contribute to the increase in energy intensity in Mining. Firstly, Australia’s mining industry is increasingly dominated by coal and iron ore. Together they now constitute 94% of tonnage extracted by the mining industry (excluding petroleum, gas and construction materials) (ABARES 2010a). Both are relatively low value (dollar per tonne) commodities (ABS 2008a), despite requiring a great deal of energy for extraction and beneficiation. Therefore, they are likely to be associated with high energy intensity.

Black coal production has risen rapidly since 1987 (ABARES 2010a), coinciding with increased energy intensity for Mining. Coupled with this has been the increasing proportion of production from open cut mines, which require the removal of overburden to expose the coal. Open cuts accounted for only 55% of production in 1980 (PC 1998), but rose to 71% in 1997 and 76% in 2008–09 (ABARES 2010b).

All the major Australian iron ore mines are open cut. Iron ore production doubled between 2000 and 2008 (ABARES 2010a), the period of the largest increase in Mining energy intensity. This corresponded with a black coal production increase of 37%, and an increase in energy consumption in the mining industry of 68%. During the same period, IGVA for the mining industry increased by a much smaller factor (19%).

Another factor contributing to increasing energy intensity in Mining is Australia’s rapid growth in liquefied natural gas (LNG) production, which is an energy-intensive process (Sandu & Petchey 2009). LNG exports almost doubled from 8 megatonnes (Mt) in 2003–04 to 15 Mt in 2008–09 (ABARES 2010a).

Despite the overall trend of increasing energy intensity in the mining industry, there have been three years within the last decade in which energy intensity dropped, in relation to the previous year. Of these three years, 2000-01 had the most significant decrease, with energy intensity 12% lower than in 1999-00. This large decrease has been attributed to the introduction of energy-saving technologies in the mining industry (Tedsco & Thorpe 2003).

Implications of a rapidly expanding mining industry

One of the potential consequences of the long-term depletion of Australia's mineral and energy reserves is that eventually, more energy will be required to produce a unit of physical output (as the highest grade and/or easiest minerals to extract are generally extracted first) (Sandu & Petchey 2009). This could result in continued increases in energy intensity in the mining industry.
MANUFACTURING

Energy consumption in Manufacturing grew from 968 PJ in 1978-79 to 1,281 PJ in 2008-09, an increase of 32%. IGVA for the industry grew from $72.5 billion to $109.4 billion, a 51% increase over the period. Thus, a small decrease (12%) in energy intensity was observed over the period.Energy intensity in manufacturing fell most sharply in the late 1970s to early 1980s, which corresponds with a period of rapidly rising prices for petroleum products (Treasury 2006). This resulted in energy saving measures being introduced to contain costs, a phenomenon which is reflected in stable or declining energy use over this period even as IGVA increased.

The continued decline in energy intensity in manufacturing through the 1980s and 1990s is attributable to improved efficiency in the manufacturing of metal products and non-metallic mineral products. Other less energy-intensive types of manufacturing, such as food and textile manufacturing, experienced increases in energy consumption over the same period, but the overall trend in manufacturing energy intensity was still downwards (Sandu & Petchey 2009).

The long term downward trend in energy intensity in manufacturing ended in 2004-05, with energy intensity more recently characterised by fluctuation. Much of this fluctuation can be attributed to the diverse nature of manufacturing industries' energy use and economic profile. Some subdivisions of the manufacturing industry such as metal production or petroleum product production, are highly energy-intense. On the other hand, machinery and equipment manufacturing has a significant economic value (around 17-20% of total manufacturing IGVA over the last decade) but relatively small energy use (around 1% of manufacturing energy use).

In particular, recent fluctuations in energy intensity can be particularly attributed to Petroleum, coal and chemical manufacturing. This type of manufacturing has constituted between 21% and 26% of total manufacturing energy use over the last decade and its energy use fluctuates in a way which does not always directly correspond with IGVA in a given year. The overall fall in energy intensity in manufacturing in 2007-08 was largely due to decreased energy use which is not matched by an equivalent decrease in IGVA. In 2008-09 the converse situation occurred, with increased energy use in petroleum, coal and chemical manufacturing and a reduction in gross value added.

However, in addition to the influence of petroleum, coal and chemical manufacturing, overall manufacturing energy intensity also rose in 2008-09 due to a generalised fall in gross value added across all types of manufacturing. IGVA fell by 5.9% in 2008-09. Energy use also fell in that year, but only by 3%.

WATER SUPPLY AND WASTE SERVICES


Although still a relatively small energy user in absolute terms, energy consumption in the Water supply, sewerage and drainage services and Waste, collection, treatment and disposal services industries increased 142% from 10 PJ in 1978-79 to 24 PJ in 2008-09. Over the same period, IGVA increased by 58% from $5.8 billion to $9.2 billion. This resulted in an increase in energy intensity of 53%, most of which occurred from 2002-03.

Electricity is the most used energy product by the water supply industry, contributing around three-quarters of total energy use in 2008-09, and was the main contributor to rising energy intensity in the water industry over the last decade.

Water supply via traditional dam storage is the least energy-intense form of water supply, however in recent times the impact of drought and the desire for future drought-proofing have led to increased use of alternative water supply options. (Rocheta & Peirson, 2011).

The water supply industry has recently seen increased use of long-distance pumping, increased ground water extraction, and increased use of recycled water. These are all methods of supplying water which are more energy intensive than dam storage. (Knights et al 2007). In addition a large present and future contribution to the energy intensity of the Australian water supply, especially during periods of drought, is the commissioning of desalination plants where desalination is reported to be up to 10 times more energy intensive (depending on the method) than the treatment of dam-stored water. (Rocheta & Peirson 2011, National Water Commission 2008).
CONSTRUCTION

The construction industry has experienced the largest proportional decline in energy intensity of all industries. Energy consumption declined by 29%, from 202 PJ in 1978-79 to 143 PJ in 2008-09. This reduction came despite a 192% increase in IGVA from $30.8 billion to $90.1 billion over the same period. Construction energy intensity therefore fell by 76%, with large increases in the value of construction work being the primary contributor.

Construction energy intensity declined most noticeably from 1991-92 onwards, although there was a brief increase in 2000-01 which coincided with a large fall in the value of total construction work undertaken.

The large long-term decline of Construction energy intensity has coincided with significant increases in engineering construction’s share of total construction relative to the other category, building construction. In the last 20 years engineering construction’s share has risen from 30% to about half of the total value of construction undertaken. A possible explanation for the connection between engineering construction and lower energy intensity is that engineering construction often relates to large, technically challenging projects utilising expensive componentry and techniques. The value added per unit of energy input would therefore be higher than for building construction.

Within engineering construction, the most rapid growth in total value has been in oil, gas, coal and other minerals engineering construction. This has risen as a proportion of total engineering construction from below 10% in 1990-91 to above 30% in 2008-09 (ABS 2010a).
TRANSPORT


Energy consumption in the transport industry increased 74% from 300 PJ in 1978-79 to 523 PJ in 2008-09. Over the same period, IGVA increased by 194% to $59.9 billion, resulting in a decrease in energy intensity of 41%. In absolute terms, Transport has attained greater declines in energy intensity than other industries, falling from 14,715 GJ/$m in 1978-79 to 8,738 GJ/$m in 2008-09.

Most of the reduction in energy intensity was achieved in the first decade of the reference period, which coincides with a period of large increases in real fuel prices. The effect of fuel prices is particularly pronounced in road freight as fuel constitutes as much as a third of operating costs for trucking (Sandu & Petchey 2009). The end of very low fuel prices in Australia in the late 1970s thus provided impetus for the development of more efficient engines which, in turn, contributed to rapidly lowering fuel intensity. Energy consumption by the transport industry was flat over this period, while IGVA continued to rise.

From 1986-87 to 2000-01 energy intensity trended downward much more slowly than earlier or later periods. This flattening of energy intensity change correlated with flat real fuel prices and a return to rising energy consumption (Treasury 2006). However, the fact that the downward trend continued in the absence of rising fuel prices suggests that not all energy intensity change in Transport can be attributed to fuel costs.

Between 2000-01 and 2002-03 energy intensity dropped more rapidly and then stabilised at just under 9,000 GJ/$m of IGVA.

A large 7% drop in industry value-added for Road transport in 2008-09 was largely, but not completely, offset elsewhere within the transport industry, resulting in only a slight increase in energy intensity (1%).
COMMERCIAL AND SERVICES


Energy consumption in the 13 industries constituting Commercial and Services increased 186% from 142 PJ in 1978-79 to 407 PJ in 2008-09. Over the same period, IGVA increased by 226% to $653.3 billion. This resulted in a decrease in energy intensity of 12%, most of which occurred from 1997-98 when a consistent downward trend emerged.

Commercial and Services had the lowest energy intensity of any industry recording 5% of the consumption of Manufacturing, the industry with the highest energy intensity. This was expected as little physical production is involved in Commercial and Services industries and the vast bulk of energy consumed relates to lighting, heating, cooling, operation of office equipment and, in some industries in this group, refrigeration and cooking.

Possible reasons for the drop in energy intensity over the last 11 years include the adoption of more energy efficient lighting, heating and cooling, offshore outsourcing of labour intensive activities (eg. call centres) and the reduction in the number of outlets such as service stations and bank branches. These cost-cutting trends reduce the need for office and building space and therefore help keep energy consumption low, whilst IGVA in the commercial and services industries continues to rise.