Outlook for Energy Consumption in the Czech Republic in the Context of the Convergence Process
Emerging Energy Markets Tallin, August 21, 2008
Jan KubĂÄ?ek Advisor to the Board
Czech National Bank
Contents • • • •
Indicator of Energy Intensity of the Economy Electricity Consumption and GDP Prediction of Future Electricity Consumption Energy Savings as a New „Source of Energy“ (or Is It?)
Energy Intensity of the Economy I. Energy intensity in terms of kilograms of oil equivalent per 1000 euro of GDP 1800 1600 1400 1200 1000 800 600
200 0
EU25
BL RO EST LIT SK CZE LAT PL HUN TUR SLV USA FIN GRE PORT ESP SWE BEL UK EU25 NL LUX NOR IT FR GER IRL AUST JAP DEN
400
Source: EUROSTAT
Energy Intensity II. Energy intensity (kg of oil equivalent per 1000 EUR)
1800 BUL
1600 1400
Transition countries
1200
CZE
1000 800 600
USA JAP
400 200 0 0
50
100
150
200
• Energy intensity in transition countries is many times higher than in developed countries • The indicator of energy intensity as it is computed is misleading due to different price levels.
Price level Source: EUROSTAT and author’s calculations
Consumption of Electricity and GDP in PPS
Electricity consumption per capita (EU25 = 100)
300
• Relatively strong relationship between GDP in PPS and electricity consumption • Other factors: geographical position, industrial structure • Some countries above the fittedline, e.g. Czech Republic – is it a symptom of energy inefficiencies?
SWE, FIN 250 LUX 200
150
GER
BEL AUST
CZE 100
IRL IT
50
HUN Transition countries
0 0
50
100
150
200
250
GDP per capita in PPS (EU25=100)
Source: EUROSTAT and author’s calculations
Convergence Process GDP per capita (EU15 = 100) 100
90
EU15
80
CZE
70 60 50
HUN
40
PL
SK
30 20 1995
• •
1997
1999
2001
2003
2005
2007
Estimates of future GDP growth as a starting point for estimating future electricity demand Growth of electricity demand (long term) = EU15 growth + convergence + population development Source: EUROSTAT and author’s calculations
Prediction I.
Source: author’s calculations
• Asumptions: GDP growth 3%, income elasticity of electricity demand 0.8, elimination of current deviation of the Czech Rep. from the regression line
Prediction II. 10000 CZE 2030
9000
• Result: +52 % compared to present demand • Strong growth despite conservative assumptions
EU 15 2030
kWh per capita
8000 +52%
7000
+35%
6000
EU15 2005
CZE 2005 5000 4000 3000 2000 30
50
70
90
110
130
150
GDP per capita (EU15 = 100)
Source: EUROSTAT and author’s calculations
A Note on Industry and Electricity Demand • Weight of industry in GDP has • been decreasing. Will it reduce electricity demand?
NO. The weight of industry is reduced because of declining relative prices of industrial production. Real growth rates of industry are similar to GDP growth rates.
Source: OECD and author’s calculations
Energy Savings as A New Source of Energy I. • Position of environmentalists: better technologies will lead to savings in energy, future energy demand will not grow so fast, it may even decline, i.e. energy savings as a new source of energy • What is quantitative size of energy savings? • Methodology:
E = u. X / A E … electricity demand u … rate of use of electrical equipment X … stock of electrical equipment used in industry and services A … energy saving technology
Energy Savings as A New Source of Energy II. E = u. X / A
Source: EUROSTAT and author’s calculations
Energy Savings as A New Source of Energy III. • Energy savings were substantial and they will probably continue to be important • BUT (!): the stock of equipment grows fast, usually faster than real GDP (this is in line with diminishing marginal returns) • Therefore despite energy savings, demand for elctricity will continue to grow
Source: EUROSTAT and author’s calculations
Thank you for your attention Jan Kubicek Jan.kubicek@cnb.cz