The Energy Information Administration (EIA) has released a paper that introduces a new measure of projected energy efficiency for the United States, the aggregate composite efficiency index (ACEI). The index was derived by mathematically combining individual energy efficiency projections in some 2,500 subsectors taken from the National Energy Modeling System (NEMS). Separate indexes were also calculated for the five major sectors: residential, commercial, industrial, transportation, and electricity generation.

Constructing the Index
Measuring Changes in Energy Efficiency for the Annual Energy Outlook 2002 uses five real-world examples to illustrate the difference between energy efficiency, conservation, and energy intensity. It then presents five methods of aggregating and calculating changes in efficiency, and concludes that both the level at which measurements occur (individual technologies or end use as a whole) and the indexing methodology can make an important difference in results.

Measuring the efficiency change for a subsector as a whole--for example Light Duty Vehicles (LDV), which includes cars and light trucks--does not provide insight into how changing end-use choices (in this case, the growing consumer preference for light trucks) affect the overall change in efficiency.

Changes in the ACEI Compared With Changes in Energy Intensity AEO2002 Reference Case, 2000-2020

Source: Energy Information Administration.

Alternative methods include two indexes that are similar to the consumer price index, comparing the "cost" (energy inputs) of a basket of energy services in two different periods. The Laspeyres index uses base period weights and the Paasche index uses current period weights. A fourth technique, the Fischer index, splits the difference by computing the geometric mean of the Laspeyres and Paasche indexes.

A fifth measure, the Törnqvist index, was selected as the basis of the ACEI. This is a weighted geometric average of current period efficiency using the arithmetic average of the current and prior year shares of total primary energy consumption as weights. The weighting scheme is a market basket of energy-consuming subsector activities ("rolling weights" or "chain weights") that can be used to calculate year-to-year changes.

The calculation is modified to use the inverse of the efficiency ratio in order to generate an index that declines as efficiency increases. This makes comparison with related energy intensity measures easier. The Törnqvist is preferred because it adapts to changes in the mix of technology of end uses and avoids the distortions of fixed-weight schemes. It is a commonly used index in energy analysis.

Results
The figure above compares the ACEI and two economy-wide intensity measures. Note that energy consumption on a per capita basis rises throughout the projection interval, while the energy-to-real GDP ratio and the ACEI show intensity decreases or efficiency increases by their declines. The average rate of decline for the ratio of energy consumption to real GDP is approximately triple that for the ACEI, reflecting other shifts in the economy beyond efficiency improvements.

The ACEI also shows that the increase in efficiency in the LDV fleet is greater than apparent from the aggregate end-use calculation, also due to a shift in the LDV fleet composition.

The paper uses the ACEI to evaluate efficiency gains in the Annual Energy Outlook 2002, and shows how projections of primary energy consumption would vary when energy intensity and efficiency measures are held at base-year levels.

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File last modified: July 26, 2002