Modelling energy demand in the buildings sector within the EU

Licentiate thesis, 2012

In the on-going effort within the EU to tackle greenhouse gas emissions and secure future energy supplies, the buildings sector is often referred to as offering a large potential for energy savings. The aim of this thesis is to produce scenarios that highlight the parameters that affect the energy demands and thus potentials for savings of the building sector. Top-down and bottom-up approaches to modelling energy demand in EU buildings are applied in this thesis. The top-down approach uses econometrics to establish the historical contribution of various parameters to energy demands for space and water heating in the residential sectors of four EU countries. The bottom-up approach models the explicit impact of trends in energy efficiency improvement on total energy demand in the EU buildings stock. The two approaches are implemented independently, i.e., the results from the top-down studies do not feed into those from the bottom-up studies or vice versa. The explanatory variables used in the top-down approach are: energy prices; heating degree days, as a proxy for outdoor climate; a linear time trend, as a proxy for technology development; and the lag of energy demand, as a proxy for inertia in the system. In this case, inertia refers to the time it takes to replace space and water heating systems in reaction to price changes. The analysis gives long-term price elasticities of demand as follows: for France, -0.17; for Italy, -0.35; for Sweden, -0.27; and for the UK, -0.35. These results reveal that the price elasticity of demand for space and water heating is inelastic in each of these cases. Nonetheless, scenarios created for the period up to 2050 using these elasticities and an annual price increase of 3 % show that demand can be reduced by more than 1 % per year in France and Sweden and by less than 1 % per year in Italy and the UK. In the bottom-up modelling, varying rates for conversion efficiencies, heating standards for new buildings, end-use efficiency, and fuel mixes are applied in three scenarios. The rates for expansion of floor area and increases in living standards are the same for all the scenarios. The model outputs predict that if energy efficiency remains at the current level, then expansion of the building floor area and other increases in living standards would increase final energy demand in the EU by almost 70 % by 2050. The other two scenarios reveal the levels of improvements in efficiency that are needed to maintain energy demand at current rates or reduce it by 20 %. The results of the modelling provide a conceptual framework for the development of fiscal and regulatory policy decisions in relation to energy prices and various categories of energy efficiency measures, with the overall objective of meeting future demand for energy services of the building sector within the EU in a sustainable manner.