An econometric analysis of the drivers for residential heating consumption in the UK and Germany

Abstract

Affecting millions of Europeans, energy poverty is increasingly high on the political agenda. This paper compares space and water heating demand at household level in Germany and in the United Kingdom (UK) between 1991 and 2015. The elasticities of consumption of space and water heating with respect to price, income and heating degree days (HDD) are examined using non-parametric models. Domestic heating consumption is highly elastic with HDD in both countries and HDD elasticities are found to be higher in the UK. From a certain income threshold, heating demand decreases as income increases in German households whereas demand rises with higher incomes in the UK. High price elasticities indicate that UK households are very responsive to energy conservation measures, therefore implying that a pricing policy will effectively reduce heating consumption. However, in Germany, the impact of pricing policies is unclear. Thus, the most effective policy measure to decrease domestic heating consumption in Germany in the long-run should be one which targets improvements of building envelope performance levels.