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Energy Efficiency Trends in Canada, 1990 to 2009

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Chapter 5: Industrial sector

Overview — Industrial energy use and GHG emissions

The industrial sector used the most energy of any sector in Canada but had fewer GHG emissions than the transportation sector.

The industrial sector includes all manufacturing, mining, forestry and construction activities. In 2009 alone, these industries spent $33.3 billion for energy. Total energy use by industry accounted for 37 percent of the total energy use (see Figure 5.1) and 31 percent of end-use GHG emissions (see Figure 5.2).

Figure 5.1 – Secondary energy use by sector, 2009

Figure 5.1 – Secondary energy use by sector, 2009.

Figure 5.2 – GHG emissions by sector, 2009

Figure 5.2 – GHG emissions by sector, 2009.

The energy use of an industry is not necessarily proportional to its level of economic activity.

In 2009, the industrial sector’s share of GDP accounted for 23 percent of the Canadian total (excluding agriculture). The main contributor to industrial GDP was “other manufacturing,” which includes the food and beverage, textile, computer and electronic industries. Construction and mining were the only other industries that contributed more than 10 percent to the industrial sector’s GDP (see Figure 5.3).

Although GDP is an indicator of economic activity, a notable characteristic of the industrial sector is that the industries with the highest activity level do not necessarily use the most energy. For example, the pulp and paper industry is responsible for 18 percent of industrial energy use, but only 3 percent of economic activity. In contrast, an industry such as construction is responsible for 24 percent of the economic activity, but only 2 percent of industrial energy use (see Figure 5.3).

Capacity utilization

During the recession of 2008–2009, energy intensity increased 12 percent while industrial capacity utilization fell from 78.0 percent to 69.6 percent. Sectors such as mining, transportation equipment, and iron and steel showed significant declines in 2009. This highlighted the need to include capacity utilization in our factorization analysis of Canadian industry. While we currently lack the data to conduct this analysis at a detailed level, we were able to factor out the capacity utilization effect at the aggregate level. The results are presented in this chapter.

Figure 5.3 – Distribution of energy use and activity by industry, 2009

Figure 5.3 – Distribution of energy use and activity by industry, 2009.

Variation of fuel use by industry

In the industrial sector, energy is used primarily to produce heat, to generate steam or as a source of motive power. For example, coal is one of the types of energy used by the cement industry to heat cement kilns. Many other industries use natural gas to fuel boilers for steam generation and electricity to power motors for pumps and fans.

Natural gas and electricity were the main fuels used in the industrial sector in 2009, meeting 37 percent and 21 percent, respectively, of the energy needs of the sector. Wood waste and pulping liquor (13 percent) and still gas and petroleum coke (15 percent) were the other most used fuel types.

The type of energy used varies greatly depending on the industries in which it is used. Although electricity is used across the entire sector, the smelting and refining industry requires the most electricity, accounting for almost 28 percent of the sector’s electricity use.

Wood waste and pulping liquor are primarily used in the pulp and paper industry because they are recycled materials produced only by this industry. However, some of the electricity produced from these materials is sold to other industries.

Trends — Industrial energy use and GHG emissions

From 1990 to 2009, industrial energy use increased 17 percent, from 2710.0 PJ to 3168.4 PJ. The associated end-use GHGs increased 8 percent, from 134.3 Mt to 144.5 Mt. GDP increased 25 percent, from $221 billion ($2002) in 1990 to $276 billion ($2002) in 2009 (see Figure 5.4).

Figure 5.4 – Industrial energy use by fuel type and GDP, 1990 and 2009

Figure 5.4 – Industrial energy use by fuel type and GDP, 1990 and 2009.

In most cases, fuel shares remained relatively constant between 1990 and 2009 because fuel consumption increased for most fuel types during this period. The exceptions were heavy fuel oil (HFO), which experienced a 67 percent decrease, and coke and coke oven gas, which decreased 30 percent.

One reason for the decline in use of HFO was that the pulp and paper industry, the largest user of HFO, adopted alternate forms of fuels such as pulping liquor. Fuel switching was facilitated by the use of interruptible contracts, with energy suppliers allowing the industry to react to changes in relative prices of fuels. In 2009, the Government of Canada created the Pulp and Paper Green Transformation Program (PPGTP),7 which offers pulp and paper mills funding of $0.16/litre of black liquor burned.

Forestry, mining, smelting and refining, and other manufacturing have all experienced large growth in energy use since 1990. However, forestry consumes proportionately less energy than the other three sectors (mining, smelting and refining, and other manufacturing). The trends for these three main contributors to energy demand are now described in greater detail, along with the trends for the pulp and paper industry.

Trends — Mining energy use and GHG emissions

The mining industry comprises industries engaged in oil and gas extraction, coal mining, metal ore mining, non-metallic mineral mining, quarrying and support activities for mining and oil and gas extraction.8

Since 1990, the mining industry’s energy consumption grew 176 percent and its associated end-use emissions grew 154 percent. The GDP of the mining industry increased 30 percent over the 1990–2009 period, from $38.9 billion ($2002) to $50.6 billion ($2002), compared with a 25 percent increase for the entire industrial sector.

Upstream mining was the biggest contributor to mining’s GDP, representing 90 percent ($45.4 billion) in 2009. Activity in the oil sands was the main driver in the increase in energy demand from the mining industries.

Upstream mining includes oil sands mining operations. Since the late 1990s, production from non-conventional resources (oil sands) increased. Driven by technological advances, which have lowered production costs, and by additional revenue from higher crude oil prices, investment in oil sands projects has become much more attractive.

The production of bitumen and synthetic crude oil in 1985 was 35,000 cubic metres per day (m³/day). It reached 71,000 m³/day by 1996 and climbed to 212,000 m³/day by 2009. This increase is the principal factor explaining the increase of 310 percent in the energy used by the upstream mining industry since 1990 (see Figure 5.5).

Figure 5.5 – Industrial energy use by selected industry, 1990 and 2009

Figure 5.5 – Industrial energy use by selected industry, 1990 and 2009.

Trends — Smelting and refining energy use and GHG emissions

The smelting and refining industries are primarily engaged in the production of aluminum, nickel, copper, zinc, lead and magnesium.

The smelting and refining subsector is the third largest contributor to growth in energy demand. This was mainly driven by economic growth, as the GDP increased from $2.8 billion ($2002) in 1990 to $4.6 billion ($2002) in 2009 – a 67 percent increase. During the same period, associated GHG emissions increased 10 percent.

Figure 5.6 – Smelting and refining energy use by selected industry, 1990 and 2009

Figure 5.6 – Smelting and refining energy use by selected industry, 1990 and 2009.

The production of aluminum grew 93 percent between 1990 and 2009 and is responsible for most of the 59 percent growth in energy use in this subsector since 1990 (see Figure 5.6).

Trends — Pulp and paper energy use and GHG emissions

The pulp and paper industry is engaged in the manufacturing of pulp, paper and paper products and is the main user of biomass as a source of energy.

Pulp and paper production has decreased its energy use by 23 percent since 1990 and now represents 18 percent of sectoral energy use. The largest decline came from the newsprint mill industry, with a 48 percent decrease since 1990 (see Figure 5.7). GHG emissions have decreased 57 percent since 1990 for the sector as a whole.

Figure 5.7 – Energy consumption by subsector of the pulp and paper industry, 1990 and 2009

Figure 5.7 – Energy consumption by subsector of the pulp and paper industry, 1990 and 2009.

Trends — Other manufacturing energy use and GHG emissions

Other manufacturing is a residual category of manufacturing industries not classified elsewhere in the industrial sector definition used in this analysis. This category includes many industries, such as wood products, food and beverage, and motor vehicle manufacturing.

Other manufacturing energy use increased from 551.1 PJ to 635.9 PJ between 1990 and 2009. GHG emissions were about 28 Mt in both 1990 and 2009, while GDP increased from $102.3 billion ($2002) to $131.3 billion ($2002).

The biggest energy consumer in the other manufacturing category is the wood products industry. These establishments are engaged in

  • sawing logs into lumber and similar products, or preserving these products

  • making products that improve the natural characteristics of wood; for example, by making veneers, plywood, reconstituted wood panel products or engineered wood assemblies

  • making a diverse range of wood products such as millwork

The wood products industry represented 7 percent of the other manufacturing subsector’s energy use, with 47.2 PJ. Its average annual increase was 0.3 percent.

Detailed energy use data are taken from the Industrial Consumption of Energy survey for 1990 and from 1995 onward. Data for 1991–1994 are from the Canadian Industrial End-Use Energy Data and Analysis Centre’s (CIEEDAC’s) report Energy Intensity Indicators for Canadian Industry 1990–2009. Previously, all detailed energy use data came from the CIEEDAC report. This means that detailed industry categories will not compare exactly with those of previous years.

Industrial energy intensity and efficiency

Energy intensity

Several factors influenced the trends in energy use and energy intensity. Since 1990, energy intensity has decreased at an average annual rate of 0.3 percent, from 12.3 MJ/$2002 – GDP in 1990 to 11.5 MJ/$2002 – GDP in 2009 (see Figure 5.8). Note that between 2008 and 2009, energy intensity increased 12 percent, while capacity utilization fell 8.4 percentage points to 69.6 percent. This is well below the 78.9 percent capacity utilization9 seen during the 1991 recession.

Figure 5.8 – Capacity utilization and energy intensity per year

Figure 5.8 – Capacity utilization and energy intensity per year.

At the aggregate industry level, 6 of the 10 industries reduced their energy intensity10 over the 1990 to 2009 period. Four industries experienced an increase: mining, petroleum refining, forestry, and iron and steel. The biggest increase in energy intensity was 129 percent in forestry. Figure 5.9 illustrates that energy use in forestry increased 65 percent, while GDP fell 28 percent. In the mining sector, the move toward unconventional crude oil production contributed to the increase in the energy intensity.

Gains in energy efficiency and a shift toward less energy-intensive activities were contributing factors in the subsectors that decreased their energy intensity. Energy efficiency improvements in the form of more efficient capital and management practices are important factors. Another key variable linked to energy intensity is the capacity utilization rate. This rate is calculated by dividing the actual production level for an establishment (measured in dollars or units) by the establishment’s maximum production level under normal conditions.

Figure 5.9 – Change in GDP and energy use, 1990–2009

Figure 5.9 – Change in GDP and energy use, 1990–2009.

Energy efficiency

In 2009, Canadian industry saved $6.2 billion in energy costs due to energy efficiency improvements. Industry saved 592.8 PJ of energy and 27.0 Mt of GHG emissions (see Figure 5.10). As indicated earlier, this year’s analysis incorporates an assessment of the influence of variation in capacity utilization.11

Figure 5.10 – Industrial energy use, with and without energy efficiency improvements, 1990–2009

Figure 5.10 – Industrial energy use, with and without energy efficiency improvements, 1990–2009.

Figure 5.11 illustrates the influence that various factors had on the change in industrial energy use between 1990 and 2009. These effects are the

  • activity effect — Activity (the mix of GDP, GO and production units) increased the energy use by 44 percent, or 1,181.5 PJ, and GHG emissions by 53.9 Mt.

  • structure effect — The structural changes in the industrial sector, specifically, a relative decrease in the activity share of energy-intensive industries, helped the sector to reduce its energy use and GHG emissions by 706.8 PJ and 32.2 Mt, respectively.

  • capacity utilization effect — The capacity utilization effect increased industrial energy use by 576.5 PJ and emitted 26.3 Mt more GHGs.

  • energy efficiency effect — Improvements in the energy efficiency of the industrial sector avoided 592.8 PJ of energy use and 27.0 Mt of GHG emissions.

Figure 5.11 – Impact of activity, structure, energy efficiency and capacity utilization on the change in industrial energy use, 1990–2009

Figure 5.11 – Impact of activity, structure, energy efficiency and capacity utilization on the change in industrial energy use, 1990–2009.

Furthermore, manufacturing energy efficiency savings grow to 688.5 PJ in 2009 if we factor out capacity utilization (see Figure 5.12).

Figure 5.12 – Manufacturing energy use, with and without energy efficiency improvements, 1990–2009

Figure 5.12 – Manufacturing energy use, with and without energy efficiency improvements, 1990–2009.

Also, to provide a better assessment of energy efficiency gains from the rest of the industry, the factorization analysis was produced without the upstream mining sector and with capacity utilization factored out.

Without upstream mining, Canadian industries improved energy efficiency by 35 percent, which represents 881.5 PJ of savings (see Figure 5.13).

Figure 5.13 – Industrial energy use, with and without energy efficiency improvements (without upstream mining), 1990–2009

Figure 5.13 – Industrial energy use, with and without energy efficiency improvements (without upstream mining), 1990–2009.

Figure 5.14 presents the impact of activity, structure and energy efficiency on the change in industrial energy use without upstream mining:

  • activity effect — The mix of GDP, GO and production units (activity measures) increased the energy use by 1,060.8 PJ and GHG emissions by 47.2 Mt.

  • structure effect — The structural changes in the industrial sector helped the sector to reduce its energy use and GHG emissions by 888.1 PJ and 39.5 Mt, respectively.

  • capacity utilization effect — The capacity utilization effect increased energy use by 513.3 PJ and emitted 26.3 Mt more GHGs.

  • energy efficiency effect — Improvements in the energy efficiency of the industrial sector avoided 881.5 PJ of energy use and 39.2 Mt of GHG emissions.

Figure 5.14 Impact of activity, structure, energy efficiency and capacity utilization on the change in industrial energy use (without upstream mining), 1990–2009

Figure 5.14  Impact of activity, structure, energy efficiency and capacity utilization on the change in industrial energy use (without upstream mining), 1990–2009.

7 The PPGTP provides pulp and paper mills with one-time access to $1 billion in funding for capital investments that make environmental improvements to their facilities. Pulp mills located in Canada that produced black liquor between January 1 and December 31, 2009, are eligible for funding. Mills will receive funding based on $0.16/litre of black liquor burned, until the $1 billion in funding is fully allotted.
8 NAICS code 21 excluding 213118, 213119 and part of 212326.
9 The rates of capacity use are measures of the intensity with which industries use their production capacity. Capacity use is the percentage of actual to potential output.
10 MJ/($2002 — GDP.
11 See Appendix B for the definition of capacity utilization.

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