As we approach the summit on Australian productivity, it is important to understand how energy relates to productivity.
Many people may be surprised to know that, according to Australian Energy Statistics, renewable energy provides only about 10% of Australian primary energy: 534 petajoules out of a total of 5882 petajoules in 2022-23.
The focus on high and rapidly growing contribution of renewables to electricity supply often confuses people.
The government’s Energy Update report also shows that improved energy productivity, the economic output per unit of energy consumed (the inverse of energy intensity and also often described as ‘energy efficiency’ by authorities such as the International Energy Agency), has had a major impact on energy and emissions.
But this doesn’t show the relative roles of energy productivity and renewables.
Figure 1. Role of energy productivity improvement as measured by higher GDP per unit of primary energy consumed over the past 40 years. GDP has grown much more than primary energy consumption. This graph also shows the trend in energy intensity of the economy – energy consumption per unit of GDP – this is the inverse of energy productivity, as an increase in energy productivity is equivalent to a reduction in energy intensity.
Source: Department of Climate Change, Energy, the Environment and Water (2024), Australian Energy Statistics, Table B
I have added government renewable energy data from the above sources to Figure 1 to produce a comparison of the contributions of energy productivity and renewable energy to Australian primary energy consumption and energy consumption at constant energy use per unit of GDP.
Figure 2. Australian total primary energy consumption and primary energy supplied from renewable energy compared with total primary energy if energy consumption per unit of Gross Domestic Product had remained constant at 1982-83 level.
Of course, all indicators simplify reality. The improvement in energy productivity shown in Figure 2 includes behind-the-meter consumption of rooftop solar, which is invisible to meters, and therefore appears as a reduction in energy consumption, not an increase in renewable energy. However, this would make a modest difference to the overall renewable energy contribution.
The energy productivity contribution also includes impacts of changes in the structure of the economy – for example, a shift towards more energy-intensive activities would reduce the savings from overall energy productivity by increasing energy consumption per unit of GDP.
I have looked at this issue briefly but it would be a lot of work to calculate overall impacts. I looked at Australian Bureau of Statistics data to prepare Figure 3, below.
It would be useful to look at overall impact of Australian structural change, but this involves quite a bit of work. However, Figure 3 provides some insights. It shows that the commercial services sector dominates our economic output, while mining has been the only sector to drive major recent change in shares of GDP.
All sectors have significantly reduced their energy intensity (that means they have improved their energy productivity). The energy intensity of electricity generation has halved – but this mainly reflects the government method of allocating one unit of primary energy to each unit of renewable electricity that replaces almost 3 units of primary fossil fuel.
In any case, it seems unlikely that changes in economic structure have had a major impact on the scale of real energy productivity improvement since 2007. So the graph in Figure 2 does provide a useful comparison.
Figure 3. This shows the shares Value Added (ie contributions to GDP) of Australian industry sectors since 2007 and the trends in energy intensity in all sectors. All sectors have significantly improved performance while the major shift in share of Value Added has come from mining which has relatively low emission intensity.
Clearly the focus of Australian energy policy on renewable energy means we are overlooking the significance of energy productivity as a way of building our economy, cutting carbon emissions and increasing utilisation of energy supply infrastructure.
