Ireland led 8-7 at half time at Murrayfield but Scotland shaded the play and had they been more accurate in the opposing 22, could well have gone in ahead.
After the break, the visitors turned up the heat and Scotland were unable to find the same intensity, despite the fact Ireland lost both hookers to injuries, leading to three props in the front row of the scrum and flanker Josh van der Vlier throwing in at the line-out.
"I'd rather talk about the first half than the second half, because the second half was disappointing," Townsend told the BBC.
"We created chances in that first half – it was a real high energy performance. What you'd call a proper test match."
"Both teams were a little fatigued at the start of the second half, it was there for us to lift the energy. We didn't, we weren't accurate enough. Ireland grew in confidence and were clearly the better team."
Townsend believes Ireland coped well without a hooker after some early wobbles.
"They adapted really well. They got through the first couple of lineouts and their scrum got stronger with three props in there."
Scotland will look for a third win of the Six Nations when they host Italy in their final game next week, but are now out of contention for the title in a year that had promised much.
"We're disappointed with the fact we didn't kick on. Just frustration that we didn't put our game out there," Townsend said.
"What we wanted today was a complete, 80-minute performance. We only got it for 40. We know we'll have to play well next week. Italy come here with nothing to lose."
