Revisiting heat energy consumption modeling: Household production theory applied to field experimental data

Abstract This paper offers new insights on utility-driven heat energy consumption derived from using an interdisciplinary modeling framework that is based on Becker's household production theory. The research question addressed is whether economic aspects affect short-term, less conscious behavior in the same way as long-term, more conscious behavior. From the investigation, new insights on the usefulness of price-based energy policy measures targeting heat energy consumption are gained. The household production model proposed for analyzing residential heat energy demand integrates economic, engineering and behavioral elements. Comparative statics enables an interdisciplinary integration of price- and income functions to cover economic influences on heat energy (service) consumption, the production function to cover technical influences, and the utility-based choice architecture to cover utility maximization influences. Based on a functional representation of the theories, a panel data model of heat energy consumption is estimated. The empirical analysis is based on data from 60 adjacent apartments in South-West Germany. We find empirical evidence that the price elasticity of demand is only statistically significant when using yearly aggregated data. This result provides evidence that occupants apparently do not act much based upon energy price levels when following their daily home heating routine. In less frequent considerations, as e.g. according to their yearly billing cycles, occupants adjust their heat energy consumption in response to the fuel price changes noticed on the energy bill. Furthermore, in relation to the other influences on heat energy consumption, we find that the price impact is less pronounced than the impact of comfort conditions. Therefore, a CO2 price on heat energy might set the right incentives to invest in more energy-efficient heating technology, but hardly alter comfort-taking or rebound effects.