Heating Demand in the Residential Sector: Tackling the Enigma of Low Price Elasticity of Homeowners’ Expenses

Abstract

This paper presents findings from our study which explored the price elasticities for domestic space heating energy of households in Germany. We focus upon the difference in price elasticities between homeowners and tenants found in previous studies in order to further elaborate on this. Using panel data from the GSOEP we perform fixed effects and OLS regressions to examine the influencing factors yielding the difference in heating price elasticities between homeowners and tenants. Our results suggest that the difference in the heating price elasticities is to a great extent the result of differing initial consumption levels from homeowners and tenants.
Understanding the reactions of households to rising energy prices according to various household types and initial levels of consumption and expenses is helpful in designing more target-oriented policy measures in order to reduce CO2 emissions. We show that per capita heat energy consumption is highest for homeowners of detached buildings which has increased in the past few years rather than decreased. This leads to lower price elasticities for homeowners in comparison to tenants. Reduction policies thus should have a stronger focus on the group of homeowners of detached buildings.