Air conditioning inflates bills, increasing the risk of energy poverty

Using air conditioning significantly inflates household electricity bills, with important implications for their “energy poverty”. This is revealed by a study conducted by a research team from Ca’ Foscari University of Venice and the Euro-Mediterranean Center on Climate Change (CMCC), which has just been published in the scientific journal Economic Modeling.

Previous studies carried out in the United States estimate an increase in household electricity bills due to air conditioners of around 11%. By analysing the socio-economic data of families in other OECD countries (Australia, Canada, France, Japan, The Netherlands, Spain, Sweden and Switzerland) and NASA climate data, the authors of this new study calculated that, on average, using air conditioning leads to spending up to 42% more on electricity, compared to those who do not have air conditioners.

The actual increases will depend on how many more degrees Celsius families will have to face due to climate change. Electricity consumption for air conditioning will therefore be a new factor destined to worsen energy poverty linked to electricity, a condition in which families find themselves spending more than 5% of their annual income on electricity bills.

According to the Buildings Performance Institute Europe, energy poverty already affected 10-15% of European households in 2014.

The study recently published outlines an even more worrying situation. “The concept of energy poverty, already the subject of attention in Europe, is normally linked to the possibility of ensuring adequate heating during the colder months,” explains Enrica De Cian, Professor of Environmental Economics at Ca’ Foscari and head of the research team for the  ERC EnergyA project, which carried out the study. - Our data, however, suggest we broaden the concept by including the increasingly decisive role of air conditioning in the summer. Poor households already normally spend a large proportion of their budget on essential goods, such as food and electricity. The latter of these will have to increase to protect the most vulnerable from the risk of death or other serious health problems during heat waves,”

Having air conditioning significantly affects the energy expenditure of both households and countries, even if there are still big differences: in the United States it represents 11% of the energy consumption in buildings, while in Europe it is only 1.2%.

“The data we analysed reveal that 18.5% of Spanish households spend more than 5% of their budget on electricity,” says the economist from Ca‘ Foscari. These percentages are generally higher in cold countries, reaching 24.2% in Sweden. In France and Switzerland, the figures are lower: 8% and 5% respectively.” Italy has not been analysed because it is not included in the OECD dataset considered in this study, but “we expect a similar trend in France and Spain, and we are verifying it in the studies we are carrying out.”

Who uses air conditioners and why

“The innovative element of this work,” says the economist Teresa Randazzo, main author of the study,” is that our empirical analysis allows us to take into account choice factors that are normally difficult to observe and measure, such as the personal perception of thermal comfort, risk aversion or environmental awareness.”

In effect, the study highlights the fact that various characteristics of individuals and households lead - or not - to the use of air conditioning in the home. For example, the presence of children in the home leads to increased installation and use of air conditioners.

More educated persons tend to use conditioners less, suggesting that they are more aware of the impact of their consumption on the environment. Likewise, families who are more inclined to save energy tend to use air conditioning less. Conversely, families who own numerous electrical appliances tend to use air conditioners more.

Living in urban areas increases the probability of adopting an air conditioner by 9 percentage points, an significant influence, as compared to the role of climate or family income, probably due to the phenomenon of urban heat islands,” explains Malcolm Mistry, head of climate data for the EnergyA project and co-author of the research.

Analysis of data on households and climate

To better understand the dynamics of using air conditioning in industrialized countries and its impact on household budgets, including in light of climate change, EnergyA researchers examined eight OECD countries of different latitudes: Australia, Canada, France, Japan, the Netherlands, Spain, Sweden and Switzerland .

The researchers combined geo-coded information on 3,615 families from OECD data collected in 2011 with historical climate data. “Our reworking of NASA-GLDAS climate data calculates what are known as Cooling Degree Days for the past 49 years, an indicator commonly used in literature to capture the intensity and duration of particularly hot periods and the corresponding need for air conditioning,” explains Malcolm Mistry.

Trends in the AC market

Driven largely by the residential sector, annual sales of air conditioners have more than tripled worldwide since 1990, reaching 135 million units in 2016, according to the latest data from the International Energy Agency. China leads the way, with 41 million air conditioners in private homes, followed by 16 million in the United States and around 9 million in both Japan and Europe. “According to our study, in addition to the decisive role of improved living standards, climate change will lead to a greater demand for air conditioning in Europe too, with increases of up to 21% in Spain and 35% in France within just 20 years,” concludes Professor De Cian.