To-date, decomposition analysis has been widely used at the macro-economic level and for in-depth analyses of the industry and transport sectors; however, its application in the residential sector has been rare. This paper uses the Log-Mean Divisia Index I (LMDI-I) methodology to decompose gas consumption trends in the gas-connected residential sector in Ireland from 1990 to 2008, which despite an increasing number of energy efficiency policies, experienced total final consumption growth of 470%. The analysis decomposes this change in gas consumption into a number of effects, examining the impact over time of market factors such as a growing customer base, varying mix of dwelling types, changing share of vacant dwellings, changing size of new dwellings, the impact of building regulations policy and other factors such as the weather. The analysis finds the most significant effects are changing customer numbers and changing intensity; the analysis also quantifies the impact of building regulations and compares it with other effects such as changing size of new dwellings. By comparing the historical impact on gas consumption of policy factors and non-policy factors, this paper highlights the challenge for policy-makers in achieving overall energy consumption reduction.
In Ireland from 1990 to 2008, natural gas total final consumption (TFC), for all sectors of the economy, grew by an average annual rate of 6.1%, the highest rate for any fuel in Ireland during that period; in 2008, natural gas accounted for 12.4% of Ireland's TFC. In the residential sector, natural gas TFC grew by an average annual rate of 10.2%, growing from a 5.2% share in 1990 to a 21% share in 2008 (Howley et al., 2009a). Ireland's natural gas import dependency went from 0% in 1990 to 92% in 2008 (Howley et al., 2009b). The EU has also experienced growth in natural gas TFC and import dependency: over the period 1990 to 2008, natural gas TFC in the EU12 grew at an average annual rate of 3% (Eurostat, 2010b); concurrently, the EU expanded to 27 member state countries and from a low of 45.6% in 1998, import dependency climbed to 62.3% in 2008 (Eurostat, 2010a), as illustrated in Fig. 1.
Fig. 1Source: prepared by the authors based on Eurostat (2010b).
The negative consequences of Europe's import dependency became apparent during the Russia Ukraine gas crisis in 2008. The second EU strategic energy review was published following this crisis and focused on security of supply (European-Commission-Energy, 2009), proposing a significant upgrade to gas infrastructure in an attempt to address the volatility of EU gas supply. Other EU energy policies that also seek to reduce our dependence on imported gas include a focus on energy efficiency (notably the Energy Services Directive (ESD) (EC, 2006), Energy Performance in Buildings Directive1 (EC, 2010)) and renewable energy (Renewable Energy Directive (EC, 2009)). However, it remains the view of both the EU and IEA that natural gas will have a bridging role between the energy past and future (Vinois, 2010, Baroni, 2010).
1.1. Policy trends
The residential sector is a significant energy user and represents a significant opportunity for energy efficiency improvement in Ireland. It has been the focus of increased policy activity, as can be seen from the MURE2 database, a centralized storehouse listing energy policies for all sectors of the economy for all EU member countries.3 For 1990–1999, the MURE database lists five energy end-use policies in Ireland's residential sector; for 2000–2008, fourteen policies are listed (MURE-II, 2011).4 In 2006, as obliged by the Energy Services Directive (EC, 2006), Ireland prepared a National Energy Efficiency Action Plan (NEEAP), which contained many of the same policies. A particular focus has been on improving the energy performance of new homes. Ireland's NEEAP had building regulations (BR) contributing a 48% share of the energy savings target for 2020, making it the most significant type of policy measure in the residential sector. Until 2008, most of the other policies listed in MURE were either niche policies (e.g. fuel poor dwellings, appliance efficiency and renewable energy grants) or pilot policies (low carbon homes, smart metering). The only policy to address existing dwellings, focusing on the largest energy end-use category of space heating was an information campaign, promoting behavioral change towards efficiency in the home.
1.2. Lit review
Despite the increased number of policies in Ireland, there has been a limited number of empirical analyses of the energy performance of the dwelling stock (O'Doherty et al., 2008) or of the impact of energy efficiency policies generally (Hull et al., 2009, Rogan et al., 2011). It is particularly pertinent that such research be done since Ireland has one of the most inefficient housing stocks in Northern Europe (Healy, 2004) and in recent times has experienced an above average level of new builds (DEHLG, 2010). There have been two previous analyses on residential natural gas TFC in Ireland. Hull et al. (2009) used a 10% anonymized sample and a more detailed sample of 48 dwellings to conduct a preliminary analysis on the impact of building regulations, dwelling type, changing dwelling size and gas tariffs; the study produced results that were “not conclusive” but suggested a “substantial rebound effect and/or a degree of non-compliance with historic building regulations”; the authors recommended further work, particularly ex-post analyses of energy efficiency policies. In an examination of the impact of a national energy efficiency advertising campaign on natural gas TFC in 2006 and 2007, Diffney et al. (2009) found no significant impact on gas consumption.
A number of other analyses have been carried out on aspects of energy consumption in the Irish residential sector. Scott (1997) did a regression analysis on ownership of household energy saving appliances in Ireland with a focus on the reasons for their low take-up. Clinch et al. (2001) constructed a model of the Irish housing stock to model the energy and emissions impact of home insulation energy efficiency measures. O'Doherty et al. (2008)conducted a regression analysis on energy appliances and energy saving features in Irish dwellings. Lyons et al. (2009) calculated expenditure and own price elasticities for fuels in the household sector. Two Sustainable Energy Authority of Ireland (SEAI) reports, Energy in the Residential Sector (ÓLeary et al., 2008) and Energy Efficiency in Ireland (Dennehy et al., 2009), analyzed energy consumption in the residential sector and included a decomposition analysis of four effects (size, diffusion of central heating, technical efficiency and behavior), which impacted the energy consumption of the dwelling stock between 1995 and 2006.
A number of these analyses on gas and energy consumption in the residential sector have highlighted the need for further analysis of factors impacting energy consumption. This further analysis is important for a number of reasons: (i) measuring the efficacy of energy efficiency policies is important for designing better future policies, (ii) there is an obligation to report energy savings under the European Energy Services Directive (EC, 2006) and (iii) in view of the growing volume of energy efficiency policies, more ex-post analyses are required to sufficiently model current and future energy demand. It is in this context that an expanded decomposition analysis is seen as a powerful analytical tool.
1.3. Decomposition analysis
A collaborative report between the IEA and the IAEA recommended the use of decomposition to study changes in energy demand in all sectors, including the residential sector (IAEA, 2005) and the IEA has demonstrated the usefulness of decomposition analysis by comparing nine countries for five different effects (Taylor, 2009). This paper uses the Log-Mean Divisia Index (LMDI) decomposition analysis methodology. Decomposition analysis was first used in the late 1970s to examine the impact of changes in product mix on energy intensity and consumption. It has since broadened its scope to include analysis of energy supply and demand, energy-related emissions, material flow and dematerialization, monitoring of national energy efficiency trends and making cross-country comparisons of energy performance (Ang, 2004).
A survey of decomposition studies in 2000, which found 124 studies in the literature (Ang and Zhang, 2000), focused largely on industry, with some studies examining the economy as a whole, and a smaller number focusing on transport. Decomposition papers focused on the residential sector are rare, just two currently exist in the literature (Unander et al., 2004, Achao and Schaeffer, 2009), which provided a motivation for this paper.
Decomposition analysis in Ireland has been carried out on industry (Cahill et al., 2010, Cahill and Ó Gallachóir, 2010), on the economy as a whole (O'Mahony, 2010) and on the transport sector but this represents the first decomposition analysis on the residential sector and focuses on natural gas demand. The analysis carried out here is readily replicable in other countries to quantify the policy and non-policy factors affecting natural gas demand trends in the residential sector.
A number of papers have included the residential sector in broader analyses: Munksgaard et al. (2000) analyzed the impact of direct and indirect household consumption on emissions in Denmark, Wachsmann et al. (2009) did a structural decomposition analysis of energy demand in Brazil, which included the residential sector, Donglan et al. (2010) examined changing emissions in rural and urban household sectors in China and Kumbaroğlu (2011)examined emissions in Turkey.
1.4. Analysis objectives
Over the time scale 1990–2008, this decomposition analysis seeks to quantify the impact of a number of policy and non-policy factors on natural gas TFC. As the table in Appendix Ashows, there was a growing volume of energy efficiency policy measures over this period; however, for most of the period, the focus was on BR5 for new dwellings, with little emphasis on the existing dwellings stock. By appropriate manipulation of the available data, this paper provides a preliminary analysis of the dominant energy efficiency policy for the period: the 2002 BR. Other energy efficiency policies occur too late in the analysis period to be examined, do not address space heating of existing dwellings or are not readily quantifiable within a top-down methodology such as decomposition analysis, which is not typically used to evaluate specific energy efficiency policies. Although decomposition analysis is not an ex-post policy analysis tool, it can give an indicative quantification of the absolute and relative impact of the 2002 BR policy within a framework that also quantifies non-policy market effects (changing number of dwellings, changing share of vacant dwellings, dwelling size and type of dwellings) and intensity effects (weather effect and intensity effect).
This paper is focused on the natural gas section of the residential sector because in terms of a source of data, metered gas consumption is a uniquely excellent source (Ó Cléirigh and AEA Energy & Environment, 2008), providing accurate consumption data and many other details of dwelling type and location as described in Section 3. This paper seeks to incorporate this additional data to make a detailed analysis of the natural gas consuming residential sector. It is due to a lack of data for other fuels (oil, solid fuels and electricity), that these other sectors have not been included. The generality of the results will be seen within the context of the known differences between the national dwelling stock and the gas dwelling stock (Coniffe, 2000).
The paper is organized as follows: Section 2 discusses the trends from 1990 to 2008 of natural gas TFC, the gas network and the dwelling stock. Section 3 outlines the LMDI-I methodology, how the formula was developed to capture five effects and the data sources used. Sections 4 and 5 presents the results and discussion. Section 6 concludes and outlines potential for future analysis and research.
2. Residential natural gas sector: 1990–2008
2.1. Gas consumption trends
During the period 1990–2008, Bord Gáis Éireann (BGÉ) was the only retailer of piped natural gas to the residential sector in Ireland. In 1990, residential gas TFC was 142 ktoe, a 5.2% share of overall residential TFC; throughout the period that followed, 1990–2008, Ireland underwent a sustained economic boom during which GDP grew by 182% and TFC for all fuels in all sectors of the economy grew by 85% (Howley et al., 2009a). Residential natural gas TFC grew by an average annual rate of 10.2%, the highest rate for any fuel in the residential sector during that period and by 2008, natural gas had a 21% share of overall residential TFC (Howley et al., 2009a). Contained within these overall trends of growth in residential gas customers and natural gas TFC is a more complex interweave of trends that do not tally with the macro trend of constant growth. Starting in 2000, average annual consumption of the dwelling stock began to decline, see Fig. 2.
Fig. 2Source: prepared by the authors based on BGÉ data set.
2.2. Growth of gas network
Starting in 1990, BGÉ had 139,000 residential customers, approximately 14% of all dwellings in Ireland; in this year, over 90% of all gas connections were in Cork and Dublin. In 1993, an interconnector with the UK made landfall on the east coast of Ireland and over the rest of the decade, the gas network expanded along the northeast coast, the southeast coast and west into the rapidly growing towns in the Greater Dublin Area.6 In the early 2000s there was continued expansion around the existing urban areas of Limerick and Cork and in the towns along the existing Cork–Dublin pipeline. By 2004, the Seven Heads gas field off the south coast had been opened, a second interconnector with the UK had been constructed and a pipeline between Galway and Dublin had been completed, see Fig. 3. By 2008, natural gas residential customer numbers had grown by 342%, at a constant annual growth rate of 9%, to reach 616,000, approximately 39% of all dwellings in Ireland.
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