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Drivers of residential energy use for heating and cooling and thermal retrofit decisions

Current Project

Project Management

Karsten Neuhoff

Project Period

November 1, 2022 - October 31, 2024

Funded by

DIW Berlin - German Institute for Economic Research

Energy consumption for household heating is capturing increasing attention. In the short-term, gas – and thus heat–saving has become a core policy objective in the current energy crisis. Only if households save sufficient gas will it be possible to avoid curtailment of industrial energy gas demand. Gas savings will also reduce scarcity on the markets, and thus is an important element to mitigate the gas price increases – while at the same time a reduced heat demand will directly reduce costs. In parallel, the transition to climate neutrality requires a shift to climate neutral energy sources, primarily wind, solar and bio-mass on top of largely exhausted hydro capacities. There are serious limits on the space available for wind- and solar power – and hence a core element will be a significant reduction of heat demand primarily through a combination of better building insulation and occupant behavior.

Building on a substantial basis of existing literature on the underlying factors determining residential energy demand as well as the motivation factors and driving and inhibitors of thermal retrofit decisions, this project pursues an analysis on how households will respond to policy instruments supporting these choices. The project will find answers to three questions starting with a cross county analysis on the effects of various gas pricing policies on household gas consumption. This is to be supplemented with an analysis on the role and frequency of information treatments on gas consumption among structurally and thermally comparable dwellings. Whilst with the rather normal energy prices thermal retrofitting might not have been desired by households, particularly non-owner-occupied ones, this could have changed following the increased costs of heating. Therefore, we are going to also study the motivations and concerns of tenants and home-owners in thermal retrofitting and the role of the German tenancy law in enabling or hindering these decisions. As an overarching component, the project will identify whether national targets and energy concerns aide in creating a social norm on energy saving behavior.

The overall objective of this study is to understand the dynamics behind the households’ energy saving behavior. Our findings are going to inform policymakers on the effective ways of policy design, to achieve gas saving in the short term and alter household behavior in the long-term. As a result of this study we are aiming at summarizing our findings in a DIW weekly report, preparing and publishing a peer-reviewed journal article and creating policy briefs to be disseminated to polcy makers.

DIW Team