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Decomposition analysis allows for energy demand growth to be broken down by activity, structure and efficiency factors. In IEA member countries, it is estimated that energy efficiency improvements since 2000 avoided using 20% more energy in 2019, an amount greater than the final energy consumption of Russia. The industry and services sector accounted for 61% of these savings, buildings for 23% and transport for 16%.

Estimated savings of final energy use in IEA countries, 2000-2019

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In 2020, energy demand fell by 4% which, when combined with a 3.5% fall in global GDP in that year, contributed to make one of the worst years of energy intensity improvement in recent history, at just 0.5%. Major factors for this downturn included a higher share of energy-intensive activities in the economy, a slowdown in technical energy efficiency improvements and lower energy prices.

However, even before the Covid-19 pandemic, energy intensity improvement had been slowing, as illustrated by the IEA’s decomposition analysis, which breaks down energy demand growth into activity, structure and efficiency factors.

The deceleration in energy intensity improvement in the last years was influenced by strong demand for energy services and a shift in economic structure towards more energy-intensive industrial production, combined with only modest avoided demand from fuel switching towards electricity and slower rates of technical efficiency improvements. For example, global energy demand would have been 5% higher in 2019 if technical efficiency improvements between 2015 and 2019 had been as low as in 2020.

Decomposition of change in global primary energy use, 2015-2020

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Energy efficiency improvements helped avoid nearly two-thirds of the potential increase in energy demand that could have occurred between 2015 and 2019 due to economic growth. There has also been a steady decline in the share of coal, oil and natural gas boilers in global heating equipment sales, which fell below 50% of total sales for the first time in 2020. Sales of more efficient electric heat pumps and renewable heating equipment such as solar hot water systems made up more than 20% of overall installations in 2020.

An important contributor to changes in economic structure which added to energy demand was strong demand for energy-intensive products in China. This growth has recently led the government to increase efforts to contain electricity consumption by restricting output of steel, aluminium and cement.

Energy efficiency improvements deliver significant benefits for the climate, national budgets and for energy consumers. For example, long-running appliance efficiency policies such as minimum energy performance standards or energy labels have helped to halve the average energy consumption of many common appliances such as refrigerators, air conditioners, lighting, televisions, washing machines and cooking appliances. These huge gains have been achieved even as the price of these appliances has fallen 2% to 3% per year on average, suggesting that more stringent policy settings could curb CO2 emissions even further while still benefiting consumers. For example, in the United States the energy-efficient standards and labels programme produced net annual fuel cost savings of around USD 40 billion in 2020 or a reduction in the average annual household fuel bill of USD 320.