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Energy Efficiency Trends in Canada, 1990 to 2008

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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 2008 alone, these industries spent $39.9 billion for energy. Total energy use by industry accounted for 37 percent of the total energy use (see Figure 5.1) and 32 percent of end-use GHG emissions (see Figure 5.2).

Figure 5.1 — Energy use by sector, 2008 (percent).

Figure 5.2 — GHG emissions by sector, 2008 (percent).

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

In 2008, the industrial sector’s share of GDP accounted for 25 percent of the Canadian total (excluding agriculture). The main contributor to industrial GDP was “other manufacturing,” which includes a variety of activities such as food and beverage, textile, computer and electronic industries. Construction and mining were the only other two 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 19 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).

Figure 5.3 — Distribution of energy use and activity by industry, 2008 (percent).

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 2008, meeting 32 percent and 24 percent, respectively, of the energy needs of the sector. Wood waste and pulping liquor (14 percent) and still gas and petroleum coke (14 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, it is the pulp and paper and the smelting and refining industries that require the most electricity. Combined, these two industries account for more than 49 percent of the sector’s electricity use.

Wood waste and pulping liquor are primarily used in the pulp and paper industry since they are recycled materials produced 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 2008, industrial energy use increased 19 percent, from 2,710.0 PJ to 3,237.8 PJ. The associated end-use GHGs increased 13 percent, from 136.0 Mt to 154.0 Mt. GDP increased 40 percent from $221 billion ($2002) in 1990 to $310 billion ($2002) in 2008 (see Figure 5.4).

Figure 5.4 — Industrial energy use by fuel type and GDP, 1990 and 2008.

In most cases, fuel shares remained relatively constant between 1990 and 2008 as fuel consumption increased for most fuel types during this period. The exceptions were heavy fuel oil (HFO), which experienced a 58-percent decrease, and coke and coke oven gas, which decreased 17 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 four of the main contributors to energy demand are now described in greater detail.

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

Between 1990 and 2008, the mining industry’s energy consumption grew 138 percent and its associated end-use emissions grew 126 percent. The GDP of the mining industry increased 48 percent over the same period, from $38.9 billion ($2002) to $57.3 billion ($2002), compared to a 40 percent increase for the entire industrial sector.

Upstream mining was the biggest contributor to GDP, representing $50.4 billion ($2002) of mining’s GDP in 2008. 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 (/day). It reached 71,000 /day by 1996 and climbed to 192,000 /day by 2008. This increase is the principal factor explaining the increase of 236 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 2008.

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 $5.1 billion ($2002) in 2008 — an 84 percent increase. During the same period, associated GHG emissions increased 43 percent.

Figure 5.6 — Smelting and refining energy use by selected industry, 1990 and 2008.

The production of aluminum grew 99 percent between 1990 and 2008, and is responsible for most of the 47 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 decreased its energy use by 16 percent since 1990, and now represents 19 percent of the sectoral energy use. The largest decline came from the newsprint mill industry, with a 35 percent decrease since 1990 (see Figure 5.7). GHG emissions decreased 42 percent since 1990 for the sector as a whole.

Figure 5.7 — Energy consumption by subsector of the pulp and paper industry, 1990 and 2008.

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 553.2 PJ to 640.7 PJ between 1990 and 2008. GHG emissions were 28 Mt in both 1990 and 2008, while GDP increased from $102.3 billion ($2002) to 145.8 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 8 percent of the other manufacturing subsector’s energy use, with 49.8 PJ. Its average annual increase is 0.7 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) report Energy Intensity Indicators for Canadian Industry 1990–2008. Previously, all detailed energy use data came from the CIEEDAC report. This means that detailed industry categories will not compare exactly to previous years.

Industrial energy intensity and efficiency

Energy intensity

Several factors influenced the trends in energy use and energy intensity. Since 1990, energy intensity decreased at an average annual rate of 0.8 percent, from 12.3 MJ/$2002 — GDP in 1990 to 10.5 MJ/$2002 — GDP in 2008 (see Figure 5.8).

Figure 5.8 — Capacity utilization and energy intensity per year.

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.

At the aggregate industry level, seven of the 10 industries reduced their energy intensity9 over the 1990 to 2008 period. Three industries experienced an increase: mining, petroleum refining, and forestry. The biggest increase in energy intensity was 164 percent in forestry. Figure 5.9 illustrates that energy use in forestry increased 134 percent, while GDP fell 11 percent. Diesel fuel made up 90 percent of energy use in the industry. 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. For example, chemical industries that improved their energy intensity between 1990 and 2008 saw their share of the industry’s GDP grow from 68 percent to 77 percent over the same period.

Figure 5.9 — Change in GDP and energy use, 1990–2008.

Energy intensity

Since 1990, energy efficiency in the industrial sector improved 10 percent. In 2008 alone, Canadian industry saved $4.3 billion in energy costs and 332.5 PJ of energy or 15.8 Mt of GHG emissions. The improvement in energy efficiency was largely the result of improvements in energy intensity. The energy savings due to the energy efficiency improvements made by some industries were offset by increases in consumption by the upstream mining, fertilizer and forestry subsectors.

In previous years, the energy intensity for upstream mining was calculated by dividing energy use by GDP. As the upstream mining sector grows, so does the need to find a better way to quantify its energy efficiency gains. This year, upstream mining was divided into its components (coal mining, crude oil production, natural gas production and processing, upgrading, synthetic and bitumen production, as well as well drilling, testing, and servicing) and production was used to measure energy intensiveness. This allowed us to better quantify the energy efficiency gains achieved by the sector. However, over time the industry has experienced a switch to more energy-intensive unconventional oil production. So, even if we account for energy savings due to technological advances, the increased difficulty in extracting upstream mining resources translates into an increasingly energy-intensive process.

Figure 5.10 — Industrial energy use, with and without energy efficiency improvements, 1990–2008.

Figure 5.11 illustrates the influence that various factors had on the change in industrial energy use between 1990 and 2008. These effects are as follows:

  • activity effect — Activity (the mix of GDP, GO and production units) increased the energy use by 49 percent or 1,331.4 PJ.

  • 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 by 471.1 PJ. Note that industries consuming more than 6 megajoules (MJ) per dollar of GDP (e.g. pulp and paper, petroleum refining, upstream mining) represented 28 percent of industrial GDP in 1990 and accounted for 27 percent in 2008.

  • energy efficiency effect — Improvements in the energy efficiency of the industrial sector avoided 332.5 PJ of energy use and 15.8 Mt of GHG emissions.

Figure 5.11 — Impact of activity, structure and energy efficiency on the change in industrial energy use, 1990–2008.

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 MJ/($2002) of GDP

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