TORONTO, June 22, 2011 /CNW/ - Substantial progress has been made in improving household energy efficiency, however more needs to be done, especially with energy usage and pricing on the upswing, according to a special report released today by Scotia Economics entitled Energizing Household Energy Efficiency. Rising energy prices should help speed more efficiency gains in the future, generating long-term cost savings for households.

"High energy costs, led by the roughly 40 per cent jump in gasoline and heating fuel prices over the past two years, are taking a toll on consumer confidence, purchasing power and — ultimately — spending," said Adrienne Warren, Senior Economist, Scotia Economics.  "Household expenditures on energy totaled roughly $60 billion in 2010, or about $4,500 per household. We estimate that higher energy costs will add about $6 billion to this bill in 2011 — spending dollars that could otherwise have been allocated to other retail purchases, saved or used to pay down debt."

"There is an ongoing urgency to reduce household energy consumption because of the discernible upward trend in the price of energy," continued Ms. Warren. "Energy costs have, on average, outpaced the general rate of inflation since the 1980s, and increasingly so over the past decade. While natural gas price trends remain encouraging for consumers, the risk lies toward higher electricity costs and continued elevated oil prices."

From the perspective of households, reducing energy consumption, or at least slowing its rise, could generate significant long-term cost savings. Despite improvements in energy efficiency in both the residential and passenger transportation sectors over the past two decades, household energy consumption as a share of spending has remained relatively constant in a range of six to seven per cent.

According to the report, there are a number of encouraging trends underway supporting gains in household energy efficiency:

• Motivated in part by high gasoline prices, consumers are shifting toward smaller, more fuel-efficient motor vehicles.
• More Canadians are choosing higher-density urban living. High-density housing is more energy-efficient than traditional detached homes. It also leads to lower motor vehicle use given proximity to services and better public transportation options.
• New construction is becoming more energy-efficient. Driven by changing consumer demands and regulatory standards, new home builders are increasingly adopting energy-efficient technologies and materials.

"Energy-efficient renovations and retrofits to existing homes have the potential to make a bigger impact in driving improvements in the housing stock," noted Ms. Warren. "Expenditures on renovations and alterations are the fastest component of housing investment over the past decade, expanding an average eight per cent annually in inflation-adjusted terms. The $45 billion renovation industry is approaching new construction in total dollar value."

Households can take advantage of various programs and incentives available from federal, provincial, territorial and municipal governments as well as certain energy utilities to conserve energy and generate long-term cost savings. These range from the use of smart utility meters and off-peak pricing, to targeted rebates for energy efficient home improvements (e.g. replacing older less efficient heating/cooling systems or adding insulation). The federal Budget 2011, for example, committed an additional $400 million over the 2011-2012 fiscal year to extend the popular ecoENERGY Retrofit-Homes program, which provides grants to eligible households to offset the cost of energy-efficient upgrades.

Scotia Economics provides clients with in-depth research into the factors shaping the outlook for Canada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.