Market Snapshot: Energy efficiency has limited Canada’s increasing energy demand

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Release date: 2020-07-08

Since 1990, energy use in Canada has grown. While energy use is trending upwards, it is affected by various factors. Natural Resources Canada uses a method−decomposition analysis−to estimate and quantify the individual impact of these factors. Some increase energy requirements, others decrease them, and the sum of all the effects is the actual change in energy use.

There are five main factors influencing national energy use and energy intensity trends. These are the activity effect, the structure effect, the weather effect, the service level effect, and the energy efficiency effect. These factors are described below:

  • Activity effect: the increase in energy use due to the growth in economic activity. Over the 1990-2017 period, the activity effect was responsible for increasing national energy consumption by 4 546 petajoules (PJ).
  • Weather effect: the impact of fluctuating temperatures on energy use. In 2017, colder weather led to a 4 PJ increase in energy use compared to 1990. Although climate change is expected to come at significant net cost to the economy, its effects on weather are region-specific and hard to predict.
  • Service level effect: the increased use of equipment in homes and businesses. As the economy has become more digital, energy use has increased both at home and at work. This effect resulted in a 169 PJ increase in energy use over the 1990-2017 time period.
  • Structure effect: reflects energy use changes due to evolving economic sectors. For example, the manufacturing sector’s declining share of gross domestic product is leading to a less energy-intensive economy. Over the 1990-2017 period, the economy moved toward less energy-intensive industries, reducing energy use by 700 PJ.
  • Energy efficiency effect: represents the energy saved from using products that require less power to produce the same output. It includes, among others, better home insulation and more efficient cars. In 2017, it enabled a 2 037 PJ energy use reduction compared to 1990 levels. Energy efficiency is the leading factor contributing to Canada’s diminishing energy intensity.

For a given year, when a factor has a positive value it indicates that it increased the amount of energy used compared to 1990. Conversely, a negative value indicates the factor has decreased the amount of energy used compared to 1990. The figure below shows how these factors have contributed to the evolution of energy use using 1990 as the reference year (top chart), as well as the total change in energy use over the same period (bottom chart). The filter allows selection of specific economic sectors.

Figure 1. Canadian Annual Energy Use by Influencing Factor

Source and Description

Source: Natural Resources Canada, Energy Efficiency Trends Analysis Tables

Description: This line chart breaks down national energy use into its influencing factors. It includes the weather effect, activity effect, service level effect, structure effect, energy efficiency effect, and other. The energy efficiency effect contributed the most to total energy use reduction, with an estimated 2 037 PJ. The bar chart shows the total change in energy use by economic sector, between 1990 and 2017, using 1990 as the reference year. In 2017, total energy use was 2 132 PJ higher than in 1990. The industrial sector witnessed the highest growth in energy use, increasing by 898 PJ over the same time period. The economic sector filter allows to select specific economic sectors.

The figure indicates that some factors, such as weather, vary year to year but don’t appear to follow a specific trend. Other, such as the activity effect (mostly economic activity) and energy efficiency, show a clear trend. It also shows the importance of energy efficiency measures to partially offset increasing energy demand from increasing economic activity. Without improving energy efficiency, energy use would be much higher.

While the long-term impacts of the COVID-19 pandemic remain unclear, slower economic activity during the pandemic has led to a significant decline in energy demand.

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