Energy shock looks set to fire up global efficiency drive

The global energy market shock that has sent power costs surging is causing plenty of pain, from soaring household utility bills to forced factory furloughs and massive government bail outs.

But the power crisis that has roiled major economies and industrial minnows alike this year is also presenting an opportunity to boost the efficiency levels of energy systems that have slowed efficiency improvement rates in recent years.

Decades of relatively low and stable power prices allowed many homes and businesses to overlook energy costs as they went about their daily existence, and in many cases led to wasteful energy use and delays to energy-saving system upgrades.

But the synchronized surge in natural gas, coal and oil costs over the past year has now forced every consumer to reassess the true value of the energy they use at home, in their cars and at work - spurring a collective drive to reduce energy consumption in each facet of their lives.

The potential cumulative impact of such a wide-ranging and simultaneous energy reduction push is substantial, with consequences not just for the volumes of energy supplies currently required by countries, but also for their emissions from the use of fossil fuels burned to generate power.

Alongside planned global expansions to renewable energy supply, this collective sustained cut to total energy demand could help achieve the goal of reversing the trend in climate-affecting emissions.

Lowering energy intensity

A key measure of energy efficiency developed by research and consulting firm Enerdata tracks the total amount of energy consumed by each country to generate one unit of Gross Domestic Product (GDP).

The so-called Energy Intensity of GDP allows different economies to be compared and ranked, and reveals that while at a global level energy intensity has steadily fallen over time, several countries have struggled to lower their energy intensity beyond a certain point as populations swelled and energy-intensive manufacturing and industry sectors expanded.

Indeed, several key, fast-growing economies including Saudi Arabia, Nigeria, Iran and Brazil have actually bucked the declining trend in energy intensity and have increased the amount of energy consumed per unit of GDP since 2015.

Other economies with ambitions to develop industrial and manufacturing sectors – including India and Vietnam – are at risk of doing the same, as demographic and capital spending trends align to create more workers and factories.

However, several major economies have also successfully slashed energy intensity while simultaneously expanding economic output, and so can act as potential blueprints for other nations looking to accommodate ambitious targets on both economic and emissions-reduction fronts.

These success stories include China, which has slashed its energy intensity by 15% since 2015 while expanding GDP by over 60%, data from Enerdata and the World Bank shows.

Even after such a significant lowering in energy intensity, China has scope for additional reductions before joining the ranks of fully-developed industrialized nations including Germany and Japan, which boasted energy intensity rates of roughly half of China's in 2021.

Beijing has targeted a further 13.5% reduction in industrial energy consumption per unit of output over the 2021 to 2025 period, which it intends to achieve by phasing out outdated smokestack plants and rolling out more modern power generation and distribution systems.

China also has ambitions to become a leader in clean energy technologies, and so will likely look to export energy-saving capabilities over the coming decades just as homes, businesses and governments look set to adopt them at scale.

Similar products and processes look set to emerge from Europe, the United States and elsewhere as a result of the extensive investments made in the space in direct response to surging fossil fuel prices this year.

This means global consumers should be spoiled for choice in terms of energy-saving options once they recover from the shock of today's energy crisis and look to make changes in their energy use habits in the future.