Market Trends — Residential sector energy demand

Residential energy use per household declines for a range of technology assumptions

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In the AEO2012 Reference case, residential sector energy intensity, defined as average energy use per household per year, declines by 19.8 percent, to 81.9 million Btu per year in 2035 (Figure 74). Total delivered energy use in the residential sector remains relatively constant from 2010 to 2035, but a 27.5-percent growth in the number of households reduces the average energy intensity of each household. Most residential end-use services become less energy-intensive, with space heating accounting for more than one-half of the decrease. Population shifts to warmer and drier climates also contribute to a reduction in demand for space heating.

Three alternative cases show how different technology assumptions affect residential energy intensity. The 2011 Demand Technology case assumes no improvement in efficiency for end-use equipment or building shells beyond those available in 2011. The High Demand Technology case assumes higher efficiency, earlier availability, lower cost, and more frequent energy-efficient purchases for some advanced equipment. The Best Available Demand Technology case limits customers who purchase new and replacement equipment to the most efficient model available in the year of purchase—regardless of cost and assumes that new homes are constructed to the most energy-efficient specifications.

From 2010 to 2035, household energy intensity declines by 27.7 percent in the High Demand Technology case and by 37.9 percent in the Best Available Demand Technology case. In the 2011 Demand Technology case, household energy intensity also falls as older appliances are replaced with 2011 vintage equipment. Without further gains in efficiency for residential equipment and building shells, the total decline from 2010 to 2035 is only 13.2 percent.

Electricity use increases with number of households despite efficiency improvement

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Despite a decrease in electricity consumption per household, total delivered electricity use in the residential sector grows at an average rate of 0.7 percent per year in the AEO2012 Reference case, while natural gas use and petroleum and other liquids use fall by 0.2 percent and 1.3 percent per year, respectively, from 2010 to 2035. The increase in efficiency, driven by new standards and improved technology, is not high enough to offset the growth in the number of households and electricity consumption in "other" uses.

Portions of the Federal lighting standards outlined in EISA2007 went into effect on January 1, 2012. Over the next two years, general-service lamps that provide 310 to 2,600 lumens of light are required to consume about 30 percent less energy than typical incandescent bulbs. High-performance incandescent, compact fluorescent, and light-emitting diode (LED) lamps continue to replace low-efficacy incandescent lamps. In 2035, delivered energy for lighting per household in the Reference case is 827 kilowatthours per household lower, or 47 percent below the 2010 level (Figure 75).

Electricity consumption for three groups of electricity end uses increases on a per-household basis in the Reference case. Electricity use for televisions and set-top boxes grows by an average of 1.1 percent per year, accounting for 7.3 percent of total delivered electricity consumption in 2035. Personal computers (PCs) and related equipment account for 4.6 percent of residential electricity consumption in 2035, averaging 1.8-percent annual growth from their 2010 level. Electricity use by other household electrical devices, for which market penetration increases with little coverage by efficiency standards, increases by 1.8 percent annually and accounts for nearly onefourth of total residential electricity consumption in 2035.

Residential consumption varies depending on efficiency assumptions

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The AEO2012 Reference case and three alternative cases demonstrate opportunities for improved energy efficiency to reduce energy consumption in the residential sector. The Reference, High Demand Technology, and Best Available Demand Technology cases include different levels of efficiency improvement without anticipating the enactment of new appliance standards. The Extended Policies case assumes the enactment of new rounds of standards, generally based on improvements seen in current ENERGY STAR equipment.

Despite continued growth in the number of households and number of appliances, energy consumption for some end uses is lower in 2035 than in 2010, implying that improved energy efficiency offsets the growth in service demand. In the case of natural gas space heating, population shifts towards warmer and drier climates also reduce consumption; the opposite is true for electric space cooling.

In the Extended Policies case, the enactment of new standards is based on the U.S. Department of Energy's multi-year schedule. For lighting, which already has an EISA2007-based standard that is scheduled to go into effect in 2020, future standards are not assumed until 2026. Among electric end uses, lighting has the largest percentage decline in energy use (more than 50 percent) in the Best Available Demand Technology case from 2010 to 2035 (Figure 76).

Televisions and set-top boxes, which are not currently covered by Federal standards, are assumed to have new standards in 2016 and 2018, respectively, in the Extended Policies case. The enactment of these new standards holds energy use for televisions and set-top boxes at or near their 2010 levels through 2035.

Tax credits could spur growth in renewable energy equipment in the residential sector

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Consistent with current law, existing investment tax credits (ITCs) expire at the end of 2016 in the AEO2012 Reference case. The current credits can offset 30 percent of installed costs for a variety of distributed generation (DG) technologies, fostering their adoption. Installations slow dramatically after the ITCs expire, and in several cases their overall market penetration falls because growth in households exceeds the rise in new renewable installations (Figure 77). In the AEO2012 Extended Policies case, the ITCs are extended through 2035, and penetration rates for all renewable technologies continue to rise.

In the Reference case, photovoltaic (PV) and wind capacities grow by average rates of 10.8 percent and 9.2 percent per year, respectively, from 2010 to 2035. In the Extended Policies case, residential PV capacity increases to 54.6 gigawatts in 2035, with annual growth averaging 18.1 percent, and wind capacity grows to 11.0 gigawatts in 2035, averaging 15.9 percent per year.

The ITCs also affect the penetration of renewable spaceconditioning and water-heating equipment. Ground-source heat pumps reach a 2.6-percent market share in 2035 in the Extended Policies case, after adding nearly 3.5 million units. In the Reference case, without the ITC extension, their market penetration is only 1.5 percent in 2035, with 1.6 million fewer installations than in the Extended Policies case.

Market penetration of solar water heaters in the Extended Policies case is 2.5 percent in 2035, more than triple the Reference case share. In the Reference case, installations increase by 2.5 percent annually from 2010 to 2035, compared with 7.5 percent annually in the Extended Policies case.