Energy intensity

Energy intensity is a measure that allows determining the amount of energy resources a country needs to generate gross domestic product (GDP), which is one of the most important macroeconomic measures to know the state of its economy.

Energy intensity and productivity

It works as a measure of productivity, what is sought is to make a relation of inputs and outputs.

• The outputs are all the goods and services that can be produced in a period of time, it can be a quarter, a semester or a year.
• The inputs are all the energy resources required to achieve the result, in other words, they represent the energy costs in the country’s production process.
• Both inputs and outputs are expressed in monetary amounts in order to be able to compare them in a homogeneous way.

Analysis of results on energy intensity

When reviewing the results, the positive for a country would occur with the following conditions:

• If the same costs are maintained and the gross domestic product increases, this is an important achievement for the country.
• If energy costs are reduced and the same amount of goods and services are produced, it also results in a win-win situation in metering.
• If energy costs are increased, but the growth of the Gross Domestic Product increases in a greater proportion, it also reports a favorable result.

Any of these situations reflects an improvement in energy efficiency, because the economic use that is being given to the resources reflects a lower expense and a delivery of a greater quantity of satisfiers.

Economically we can say that wealth is being generated because the costs are lower than the results obtained.

Measurement of energy intensity

To measure the impact of consumption or demand for energy resources in countries, a macroeconomic method called Energy Intensity can be used, in which consumption is related as an important cost for production in general and the level of products achieved or be the gross domestic product.

The formula to measure the Energy Intensity is the following:

Where

• IE represents energy intensity
• E the use or consumption of energy resources
• GDP is gross domestic product

Its application would be if country A spends 50 million dollars on energy resources and produces 250 million dollars in its gross domestic product.

IE = 50/250 = 0.2

• While country B spends 100 million dollars on energy resources and produces 250 million dollars in its gross domestic product.

IE = 100/250 = 0.4

With these results we can say:

• Country A has a low energy intensity, because its energy consumption is low and the level of its production is high.
• For its part, country B has a high energy intensity, because its energy costs are high in relation to its gross domestic product.

Beware of non-cash costs

It is worth clarifying that in general the monetary costs are easy to measure, however, in this matter it is important to emphasize that the costs of environmental pollution are more difficult to measure.

• But environmental costs are a very strong component, because it may be cheaper in monetary costs to use traditional energy sources, but the environmental cost is higher than the new forms of energy that are currently being developed and implemented.
• If you want to achieve economic development in a sustainable way, it is imperative to take into account these environmental costs, due to the long-term impact they can have on our planet, on plants, animals and also on human beings.

Comparison of energy types

To get a clearer idea of ​​the monetary and environmental costs, let’s review and compare the characteristics of renewable and non-renewable energy.

In this way, a better cost-benefit relation can be made in the development, exploitation and use of both. So how to determine the results that are obtained both in the short and long term.

The purpose is to choose the best option considering its advantages and disadvantages.

Finally, we can indicate that energy intensity is a very important macroeconomic measure for any country. Since it allows them to know if energy resources are being used efficiently or inefficiently. However, the intangible costs of environmental pollution should not be forgotten, which are almost imperceptible for society in the short term, but in the long term the damages can be very serious and in some cases irreversible.