Decomposing Changes in the Energy Demand of UK Manufacturing

Over the period 1990-2007 the energy demand of UK manufacturing has fallen. A decomposition analysis was conducted to identify the effects of changes in output, structure and energy intensity on the changing energy demand. It was found that a falling energy intensity (indicating improving energy efficiency) was the principle reason for the fall in energy demand. As the UK manufacturing sector is so broad in its uses of energy, it was split into an energy-intensive (EI) and a non-energy-intensive (NEI) sub-sector to better understand the improvement in energy efficiency. The NEI sub-sector made much greater relative reductions in energy intensity in comparison to the EI sub-sector. Previous studies indicate that the EI sector may have made larger improvements in energy intensity in the period between 1973 and 1990 and this may be the reason for the limited improvement seen here. Neither energy price nor production growth appears strongly correlated with the improving efficiency over the period 1990-2007.