Determinants of Residential Space Heating Expenditures in Great Britain

In Great Britain, several policy measures have been implemented in order to increase energy efficiency and reduce carbon emissions. In the domestic sector, this could, for example, be achieved by improving space heating efficiency and thus decreasing heating expenditure. However, in order to efficiently design and implement such policy measures, a better understanding of the determinants affecting heating expenditure is needed. In this paper we examine the following determinants: socio-economic factors, building characteristics, heating technologies and weather conditions. In contrast to most other studies we use panel data to investigate household demand for heating in Great Britain. Our data sample is the result of an annual set of interviews with more than 5000 households, starting in 1991 and ending in 2005. The sample represents a total of 64,000 observations over the fifteen-year period. Our aim is to derive price and income elasticities both for Britain as a whole and for different types of household. Our results suggest that differences exist between owner-occupied and renter households. These households react differently to changes in income and prices. Our results also imply that a number of socio-economic criteria have a significant influence on heating expenditure, independently of the fuel used for heating. Understanding the impacts of different factors on heating expenditure and impact differences between types of household is helpful in designing target-oriented policy measures.