Modelling drivers of energy demand in the European Union building sector
Doctoral thesis, 2016
In the context of ongoing initiatives within the European Union (EU) to tackle global warming and to secure future energy supplies, the building sector is often cited as offering strong potential for energy savings. The primary aims of this thesis are to analyse the historical data related to EU building and to generate scenarios that highlight the technical and non-technical parameters that affect the energy demands (and thereby the potentials for savings) of the building sector.
Top-down and bottom-up approaches to modelling energy demand in EU buildings are used in the work of this thesis. In the top-down approach, econometrics are used to establish the historical contributions of the various technical and non-technical parameters related to the energy demands for heating in the residential sectors of four EU Member States. The bottom-up approach models the explicit impacts of trends in energy efficiency improvement and energy savings measures on the total energy demand in the EU buildings stock. The two approaches are implemented independently, i.e., the results from the top-down studies are not fed into those from the bottom-up studies or vice versa.
The explanatory variables used in the top-down modelling of energy demand are: energy prices; personal income; heating degree days, as a proxy for outdoor climate; the penetration of central heating in the building stock; energy efficiency policies in place; a time trend, which is a linear approximation for other effects, such as autonomous technical progress, fuel switching, and structural changes (e.g., change in floor area demand); and the lag in energy demand, as a proxy for inertia in the system.
The analysis of this thesis shows that increasing the floor area per dwelling and increasing consumer usage of electrical appliances during the period 1970–2010 exerted upward pressure on energy demand in the European residential sector, while efficiency-related legislation and autonomous technical progress had the opposite effect. For the historical period analysed, the price elasticities of demand for energy for heating are low at around -0.3. It also emerges that during the period 1990–2010, regulations were more effective at lowering energy demand for space heating in buildings in the EU-15 than either subsidies or information campaigns. For the case of useful energy for space and water heating in the Swedish residential sector, the implicit discount rate, which is an indicator of among other things the risk level that people attach to investment decisions, e.g., efficiency measures in buildings, is calculated as 10%, i.e., 6% higher that the social discount rate that is normally applied to investment decisions.
Using the knowledge obtained from the historical analysis, to examine scenarios to Year 2050, it is shown that implementation of buildings energy efficiency legislation at the historic rate is necessary to avoid runaway growth in energy demand. Further reductions in the energy demands of buildings are can be achieved more readily with targeted measures than with price rises. This is due to market barriers that prevent a price signal having the desired effect, thereby creating the so-called ‘energy efficiency gap’. These market barriers are reflected in the low price elasticity and high discount rate outlined above. Thus, given the limited effect of price increases, it is proposed that legislated regulation of energy demand in buildings needs to be expanded, if EU-wide energy goals are to be met expeditiously.
The results of the modelling in this thesis provide a conceptual framework for the development of fiscal and regulatory policy decisions in relation to energy prices and various categories and types of energy efficiency measures, with the overall objective of meeting in a sustainable manner the future demands for energy services in the EU building sector.