Our Economy Can Be More Productive AND More Energy Efficient

For many years, it was taken as a given that the use of electricity by industry was directly related to the level of industrial production.  However, we have read a lot recently about how that decades long relationship no longer holds true.  In order to get to the bottom of it, Tipping Point Renewable Energy dug into the data.  And we found that there is clear evidence that industrial production has decoupled from industrial electricity use. We believe this demonstrates clearly that as a society we can be more productive and more energy efficient.

The first graph shows the annual levels of Industrial Output (using the Federal Reserve Index of Industrial Output) and the total number of kilowatt hours used in the industrial sector (using Department of Energy's Energy Information Administration data). Since 2011, when our industrial output has been rising, electricity sales to the industrial sector have actually declined.

Digging a little deeper into the data, we found that until 1999, there was a very strong correlation between the level of Industrial Output and the total number of kilowatt hours used in the industrial sector. However, from 2000 to 2013, the correlation falls apart completely.  The graphic below shows the results of the analysis from those two experiments.

Data from the Federal Reserve of St. Louis and the Department of Energy's Energy Information Administration.

Data from the Federal Reserve of St. Louis and the Department of Energy's Energy Information Administration.

The graph on the left shows the relationship between industrial output and total electricity sales (in kWh) to the industrial sector from 1973 to 1999 (earlier months in dark red transitioning to dark green in the later years).  Likewise the second graph shows the same two dimensions from 2000 to 2014, again with earlier years in the red transitioning to green for the later years.

The r-squared value (roughly the correlation) for the two values in the earlier period is .87, which shows that the two variables are highly correlated.  However since 2000, there is virtually no correlation between the two with an r-squared of .07.

Obviously there is much work to be done explain this result and we welcome comments on approaches to explore this further. However, it does demonstrate that the economy can be more productive in terms of industrial output while we are using less electricity. This is a profound change in our economy and hopefully represents an underlying shift toward a more strategic use of energy in the industrial sector. 

Comments are open, let's hear what you think.