Improving household energy efficiency
July 18, 2011
A new report from Scotia Economics shows that increasing fuel prices are affecting consumer confidence, purchasing power and spending. In the first quarter of 2011, the share of household after-tax income allocated to energy consumption totalled 6½%, up a percentage point from the level prevailing in early 2009.
Household expenditures on energy totalled approximately $60 billion in 2010, which equates to $4,500 per household. It is estimated that higher energy costs will increase this amount by approximately $6 billion in 2011.
Gasoline purchases have accounted for about half of total household energy consumption, though this share has risen in recent years. Expenditures on housing-related energy which include natural gas, fuel oil and electricity account for the remainder.
There is an ongoing urgency to reduce household energy consumption because of the upward trend in the price of energy. Energy costs have, on average, outpaced the general rate of inflation since the 1980s, and increasingly so over the past decade. The rapid expansion in industrial activity among emerging markets, led by China and India, is a major factor in lifting demand, while periodic bouts of geopolitical tension have added to supply concerns. While natural gas price trends remain encouraging for consumers, the risk lies toward higher electricity costs and continued elevated oil prices.
Reducing energy consumption in households could generate significant long-term cost savings. Despite improvements in energy efficiency in both the residential and passenger transportation sectors over the past two decades, household energy consumption as a share of total spending has remained in a range of 6-7%.
There is a number of encouraging trends underway supporting gains in household energy efficiency. These include:
• an increase in sales of smaller, more fuel-efficient motor vehicles,
• the choice of higher-density urban living which is more energy-efficient,
• driven by changing consumer demands and regulatory standards, new home builders are increasingly adopting energy-efficient technologies and materials.
