The Modelling of National Energy Demand

This chapter discusses the application and usefulness of modeling of national energy demand. Goods and services vary greatly in the amount of energy required to produce £1 worth of each of them, that is, there is a widespread of energy intensities. Change in average energy intensity is reflected in the value of the energy coefficient, therefore, it is evident that the energy coefficient can be reduced in two ways: (1) by reducing the amount of energy necessary to provide £1 worth of any particular good; (2) by a movement in the pattern of consumption away from energy intensive goods toward those of lower energy intensity. Because different fuels are used in equipment having different efficiencies, there is a third way, that is, by a change in the fuel mix. Under the heading of increasing efficiency one can include all forms of capital/energy substitution, such as the provision of insulation to reduce heat loss. Within pattern-of-consumption changes, one can include saturation effects shown by demand for a particular good rising asymptotically to a ceiling value. The chapter describes each of these factors and presents appropriate relationships into a model of total demand.