Energy Consumption Trends in the Manufacturing Sector
Every four years, the Department of Energy’s Energy Information Administration (EIA) surveys manufacturers on their energy use. The preliminary results of the most recent survey, covering the year 2010, are in the process of being released and show that the manufacturing sector’s total energy consumption fell between 2002 and 2010. In addition, the intensity of energy consumption (consumption per unit of production) in the manufacturing sector also fell because of increased energy efficiency and changes in the mix of manufacturing activity.
Total Energy Consumption
Manufacturers use energy in various forms, e.g., petroleum, natural gas, coal, and electricity. Total energy use across these different types of energy is measured by each source’s heat value based on British thermal units (Btu). Because 1 Btu is a very small amount of energy, totals are measured in terms of quadrillion Btu, or “quads.” Energy for manufacturing activity is consumed as a fuel for heat and power and as a feedstock where it is primarily a raw material input. Nonfuel energy use in manufacturing represented more than 6 percent of total U.S. energy consumption in 2010. Most of this nonfuel energy use (99 percent) occurred in just three subsectors: primary metals, chemicals, and petroleum and coal products.
Between 2002 and 2010, total manufacturing energy consumption (adjusted to net out some double counting) fell from 22.7 quads to 18.8 quads, or by 17 percent. Energy’s use as a feedstock fell by 25.5 percent. Part of this decline reflects the movement of some fertilizer and petrochemical operations from the United States to countries where natural gas prices were lower. Given the trend in natural gas prices in recent years, energy’s importance as a feedstock may grow since some manufacturing activities that consume large amounts of natural gas are being brought back to the United States.
Intensity of Energy Use
The intensity of energy use for the entire economy is calculated by dividing total physical energy consumed by GDP, adjusted for inflation. In 2002, 97.6 quads of energy were consumed in the United States, and GDP totaled $11.543 trillion. Thus, the aggregate intensity of energy use was 8.5 thousand Btu per dollar of GDP (MBtu/$). By 2010, real GDP had increased by 13.2 percent while aggregate energy intensity fell by 11.8 percent to 7.50 MBtu/$. This represents an average annual decline of 1.6 percent.
In 2002, the manufacturing sector accounted for 23.1 percent of total U.S. energy consumption; by 2010, the manufacturing sector’s share had dropped to 19.2 percent. One reason for manufacturing’s reduced share of total energy consumption is that the manufacturing output in 2010, as measured by the Federal Reserve Board’s industrial production index for manufacturing—a measure of physical output—was 0.3 percent below its 2002 level. Other reasons include increased energy efficiency and changes in the mix of manufacturing activity.
To measure the intensity of manufacturing energy consumption, energy use in the sector was divided by the Fed’s industrial production index for manufacturing. While this measure of intensity is different from the measure of aggregate U.S. energy intensity, the percentage changes in these two indexes between 2002 and 2010 provide an indication as to the rate of change in these two energy intensities for the period. As shown in Table 2, the intensity of energy consumption in manufacturing fell by 16.7 percent between 2002 and 2010, or by an annual average rate of 2.3 percent.
Part of the decline in the sector’s intensity of energy use is attributable to changes in the mix of manufacturing activity. Industries such as iron and steel, primary metals, paper, petroleum refining, wood products, and food are much more energy-intensive than industries such as textiles, leather, machinery, and electrical equipment. The intensity of energy use changes as these industries grow (or decline) at different rates. For example, the share of total manufacturing activity accounted for by primary metals fell from 4.4 percent in 2002 to 2.6 percent in 2010. This will, holding all else constant, reduce the intensity of energy use in the manufacturing sector. On the other hand, the share of manufacturing activity accounted for by the petroleum and coke industry increased from 5.9 percent to 6.7 percent over the same period, thereby leading to an increase in energy intensity.
Energy Efficiency vs. Changes in the Mix of Manufacturing Activity
The sharp fall in manufacturing’s intensity of energy use over an eight-year period suggests that increased energy efficiency was an important factor. The change in the mix of manufacturing activity occurs slowly and is unlikely to account for most of the decline. The eventual release of additional EIA data from the 2010 survey should provide a more complete picture as to the role of efficiency in reducing the manufacturing sector’s use of energy.
 One Btu is roughly equivalent to the heat produced by burning one wooden match.
 The data on manufacturing energy consumption reported here are from an initial EIA release and are subject to change.
 The adjusted total excludes some double counting of energy consumption that occurs when, for example, coal is shipped to a steel mill, burned, and then the byproduct coke is produced and consumed elsewhere.