BritishGasHomeEnergyReport2011
An assessment of the drivers of domesticnaturalgasconsumption
February2011
Centre for Economics and Business Research Limited Unit 1, 4 Bath Street, London EC1V 9DX
020 7324 2850 www.cebr.com
Centre for Economics and Business Research Limited 2011
AboutCebr
TheCentreforEconomicsandBusinessResearchLimited(Cebr)wasestablishedin1992.Itis a specialist economics consultancy with expertise advising private and public sectorclients in theenergy, transportandcommunicationssectorsonarangeof issues includingenvironmental, consumer, regulatory and competition policy matters. Cebr also hasexpertise in national and regionalmacroeconomic forecasting and undertaking economicimpactassessments.
Disclaimer
Whilsteveryefforthasbeenmadetoensuretheaccuracyofthematerialinthisdocument,neitherCebrnorthereportsauthorswillbeliableforanylossordamagesincurredthroughtheuseofthereport.
Authorshipandacknowledgements
ContributorstotheprojectwereJonathanThurlwell,CharlesDavisandShehanMohamed.
London,February2011
Foreword by British Gas
Atthemoment1inevery4spentheatingourhomesiswastedduetopoorinsulation.
Weknowthathouseholdsarefindingtheirbudgetsstretchedand,atatimeofrisingglobalcommodityprices,thislevelofwastehastobetackled.
HouseholdsacrosstheUKunderstandthatinstallingbasicenergyefficiencymeasuressuchasinsulationwillcuttheirenergyusebutmanyareunawareofthelevelofsavingstheywillmakeasaresult.
That is why we commissioned the British Gas Home Energy Report. We wanted tounderstandtheimpactofenergyefficiencyonnationalgasconsumptionand,crucially,howitisimpactingbills.
BritishGas isuniquelypositionedtounderstandenergyuse inBritain. Wearethe largestsupplier of energy in theUKwith 16million customer accounts across the country. Weserviceand repair4millionboilerseachyear. Andweare the largest supplierofenergyefficiencyproductsinthecountry.
WeaskedtheCentreforEconomicsandBusinessResearchtoanalyse40millionBritishGascustomermeter readsover a fouryearperiod. This report, the largest ever independentinvestigationintodomesticgasuse,istheresultofthatanalysisanditsfindingsarestark.
BritishGashomeshaveseena22percentdeclineingasconsumptiononaverage,asmorehomesadoptenergyefficiencymeasures,butwithinthesenumbers,therearestilltoomanyhomeswhichhavetakennoactionatall.
Those BritishGas customerswho did adopt simple energy efficiencymeasures, such asinsulation, savedanaverageof322eachyearandsawa44percent fall in theirgasusebetween2006and2010.Thesearerealpeoplesavingrealmoneyrightnow.ThefallsingasusefollowthreedecadesofrisesandshowtheimpactenergyefficiencyishavingonBritishhomes.
Youmaywonderwhyanenergycompanywouldactivelyseektoencouragepeopletouselessenergy.Wefirmlybelieveitistherightthingtodo,and,asBritainsenergycompany,wewantandneed tobeat the forefrontof theUKs transition to low carbonhomesandbusinesses.
Ihopeyouwillfindthisreportinformativeandenlightening.ItskeymessageisgoodnewsforBritishhomes.Risingglobalenergypricesdonthavetotranslateintorisingenergybills.Energyefficiencyismakingabigdifference.
PhilBentley
ManagingDirector,BritishGas
3
British Gas Home Energy Report 2011
Executive summary
Natural gas plays a vital role inmodern Britain. It represents around twofifths of finalenergyconsumedanddominatestheUKdomesticsector.
Over much of the past forty years domestic gas consumption grew dramatically andcurrentlystandsatsix times1970UK levels.Muchof this totalconsumption includesgasusedinelectricitygenerationdestinedforthehome.
Gasdemandfordirecthouseholduseforspaceheating,hotwaterandcookingalsotripledoverthesameperiod.Thisrapidgrowthindomesticconsumptionwasdrivenbypopulationincreases,largernumbersofhouseholdsandhigherstandardsofliving.
Yet various energy efficiency measures meanwhile made significant and increasinglyeffectiveoffsettingcontributionstoconsumption.
Indeedthecurrenttrendoverthepastfiveyearshasbeenasharpdeclineingasuse,whichhasfallenby17percentacrossGreatBritain.Thisdecreasehasbeendrivenby:
Directdrivers such as structural effects which are influenced by the takeup ofenergy efficiency measures, like energy efficient boilers, insulation and doubleglazing.
Indirectdriverssuchashouseholdincomeeffectswhichareinfluencedbychangesin economic activity and consumer confidence and lifestyle factors such asincreasedenvironmentalawarenessandclimatechangeconcernsgalvanisedbyUKGovernment and energy supplier campaigns and supported by increasedmediacoverage.
BritishGascommissionedtheCentreforEconomicsandBusinessResearch(Cebr)toassessthefactorsthathavereduceddomesticnaturalgasconsumptionoverthelastfiveyears.ThefocusofthisstudyistodeterminethekeydriversofnaturalgasconsumptionbyutilisingaBritishGasanalysisofdomestic energy consumptionbasedon 40millionmeter readingsfromfourmillioncustomersbetween2006and2009.
Thishugestudysamplerepresents twofifthsofallBritishGasdomesticgasaccountsornearlyafifthoftheentirenationalmarket.
BasedonitsownanalysisBritishGashasidentifiedasubstantialdeclineindomesticnaturalgasconsumptionoverthelastfiveyears,withconsumptiondecliningby22percentovertheperiod2006to2010(comparedto17percentforGreatBritain),equivalenttoasavingof5.47milliontonnesofCO2.
ThisCebrstudyexaminesrecentdomesticnaturalgasconsumptiondeclinesinthecontextof the consumption modelling British Gas has undertaken while utilising econometricmodelling techniques to understand the key drivers of underlying gas consumption. Inaddition, Cebr has constructed scenarios to better understand the drivers of domestic
Centre for Economics and Business Research Limited 2011 4
British Gas Home Energy Report 2011
naturalgasconsumptionoverthenextfiveyearsinordertoidentifythepotentialdomesticgasbillsavingstohouseholdsatnationalandregionallevels.
TheGreatBritaindomesticnaturalgaseconometricmodelwehaveconstructedis:
Intuitive,transparentandeasytounderstand
Producesanaccuratesimulationofdomesticnaturalgasconsumptionwhichcanbeutilisedforscenarioanalysis
DevelopedindependentlybyCebr.
This report concludes that the predominant reason for reduced consumption is theimprovedadoptionofenergyefficiencymeasuressuchas installingAratedboilers,cavitywalland loft insulation,aswellasenergyefficiencyadvicewhich leads to lowornocostmeasures,suchasturningthethermostatdown,andutilisingpipeandfloorinsulation.
Key drivers
Overall, there are a number of distinct drivers of domestic gas consumption. Figure 1illustratestheprimarydriversoverthelast40years,highlightingwhetherthedriverhashadapositiveand/ornegativeimpactonconsumption.
Figure1:PrincipalendusesandprimarydriversofUKdomesticgasconsumption
Domestic natural gas consumption
Households, population, income
Temperature Energy efficiency measures
Other factors
Households Smaller households:
negative Increase in owner
occupied/privately rented : positive
Population Steady growth:
positive
Income Step change in living
standards since 1970: positive
Fluctuating short-term economic activity: negative/positive
Temperature Long-term trend in
outside winter temperatures: negative
Fluctuating short-term trends in outside temperatures: positive/negative
Inside winter temperatures of dwellings: positive
Space heating Hot water Cooking
Structural measures Energy efficient
boilers: negative Cavity wall, loft and
hot water tank insulation: negative
Double glazing: negative
Government initiatives Building regulations: negative Energy Efficiency Commitment (EEC): negative Carbon Emissions Reduction Target (CERT): negative More recent initiatives e.g. the Green Deal: negative
Energy supplier initiatives Energy efficiency advice: negative
Behavioural change Changes in level of
comfort: positive Changes in lifestyles:
negative/positive Greater green
awareness: negative Higher visibility of
energy use in the home: negative
PRINCIPAL END USES
PRIMARY DRIVERS OF CONSUMPTION
Source:Cebr
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British Gas Home Energy Report 2011
Key findings 2006 to 2010
Figure 2: Energy efficiency measures household natural gas consumption impactsamongstBritishGascustomers,annualpercentagefall,2006to2009
-20%
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
Cavity wallinsulation
New energyefficientboilers
Loftinsulation
Doubleglazing
Thermostatone degree
down
Floorinsulation
Tank jacket SmartMeters
Draughtproofing
Pipeinsulation
Source:BritishGas,Cebranalysis
Table1:Changes indomesticnaturalgas consumptionamongstBritishGas customers,annualpercentagechange,2006to2010
2006 2007 2008 2009 2010 Direct effects -3.3% -3.3% -3.3% -3.3% -3.3%Energy efficient boilers -1.2% -1.2% -1.2% -1.2% -1.2%Loft and cavity wall insulation -1.2% -1.2% -1.2% -1.2% -1.2%Energy efficiency advice1 -0.9% -0.9% -0.9% -0.9% -0.9%Indirect effects -1.6% 2.8% -3.0% -4.1% -2.0%Economic 1.3% 5.7% -0.1% -1.2% 0.9%Other factors -2.9% -2.9% -2.9% -2.9% -2.9%TOTAL -4.9% -0.5% -6.3% -7.4% -5.3%Source:BritishGas,Cebranalysis
ActualdomesticnaturalgasconsumptionofBritishGascustomersover theperiod2006to2010isonacleardownwardtrendwithconsumptionfallingatacompoundrateof4.9percentperyear,withthefollowingeffectsdrivingthesechanges.
1 Refers to advice which predominantly leads to low or no cost measures, such as turning the thermostat down, and utilising pipe and floor insulation.
Centre for Economics and Business Research Lim
