Efficient Consumption of Energy: the role of energy mix

Abstract

The promotion of energy efficiency policies is an important objective for both the International Energy Agency (IEA) and the Energy Information Administration (EIA). Based on the EIA report (1995), energy efficiency is an essential component of energy resources in nations. Improving energy efficiency helps nations to manage their energy resources. Unfortunately, according to the EIA report, there is not any defensible measurement for energy efficiency, so this concept is vague. The most common indicator for energy efficiency has been the economic-thermodynamic indicator. This indicator is the inverse of energy intensity which is defined as the ratio of energy use to GDP. Changes in energy intensity are a function of several factors such as economic structural changes, technical changes, and climate changes. Therefore, the energy intensity may not be a reliable indicator of energy efficiency. This thesis is going to illustrate energy efficiency based on the productive efficient consumption of energy. Productive efficient consumption of energy describes energy efficiency according to the level of energy inefficiency which is the distance between the actual demand for energy and the productive/optimal demand for energy. Demonstrating the effect of energy mix on the efficient consumption of energy, first in 28 OECD countries, second in the residential sector of Australia and New Zealand, and finally in selected OPEC countries relatively is the key objective of this paper. This thesis is going to utilize the Stochastic Frontier Analysis (SFA) as an approach; however, most of this thesis has tackled the energy intensity with the Decomposition Methods. Stochastic Frontier Analysis will estimate the inefficiency level according to the distance between actual demand and the optimal demand. Productive efficient demand is considered as an optimal demand in this thesis. Furthermore, tow SFA models, which are namely; Battese, G. E. and T. J. Coelli (1992) (BC92), and True Fixed Effect (TFE) models, will be utilized in the different chapters of this thesis. In the third paper, the relationship between energy consumption of OPEC countries and their population has been estimated based on Product Generation Dematerialization (PGD). Overall, this thesis demonstrates that increasing the consumption of renewable energy resources or decreasing in the consumption of fossil fuel energy resources is associated with an increase the energy efficiency. Therefore shifting towards the dominant energy resource may raise energy efficiency. Since the third essay is about OPEC countries and OPEC countries rely mainly on fossil fuels, we estimate the efficient consumption of energy after removing the renewables variables from estimation. Moreover, we illustrate the relationship between energy consumption and population in the selected OPEC countries. In the third paper, we conclude that firstly, Saudi has the highest and Iran has the lowest energy inefficiency; averagely; secondly, Algeria, Indonesia, Iran, Saudi Arabia have experienced 34%, 56%, 30%, and 45% materialization over the selected period of time; respectively.