The most recent UK Energy Trends survey provides a snapshot of UK energy consumption in Q1 2009.
Overall, gas use declined 4.3% and electricity 5.1 %. No one could expect any less during the downturn of course. Perhaps today's news of a worse than anticipated drop in UK GDP shouldn't have been a surprise :
The 2.4 per cent decline in gross domestic product was sharper than the 1.9 per cent initially calculated, the Office for National Statistics reported, and was greater than the 2.1 per cent fall expected by economists. About half the revision was due to the introduction of new construction sector data and the rest was bacause of more complete services sector figures showing a sharper decline.
We've noted before the escalator connection between GDP and energy prices. Conventional wisdom is that a rising economy rises all boats, starting with oil and energy consumption and prices. But with the UK Iron and Steel industry dropping gas use by over 33%, it's increasingly hard to see if that demand destruction will be reconstructed when, or if, happy days return to "normal" as the more bullish energy traders hope.
We think domestic use, something we don't generally worry about, provides some pointers towards the new normal. Domestic gas use was down 3.3% year on year, although January degree days were not merely 12% above average but even more worryingly were a massive 40% higher than in January 2008.
This bears repeating. January was 40% colder than the previous January yet domestics used over 3% less. Energy shouldn 't have gone up exactly 40% of course, but assuming that several hundred thousand energy users didn't move to Spain or suffered an early death, keeping the same number of houses at a livable temperature, use should have gone up, not down.
What probably happened is that consumers finally wised up: doubling the gas price finally made the investments in efficiency worthwhile and/or caused domestic behavioural change. Which means an impact on energy elasticity. One of the big unsaid fears over efficiency savings is that once prices bounce back, so will use. We don't entirely agree. Lower prices will lead to more carelessness, but not a return to the old days. The Hummer won't come back. Neither will walking around an uninsulated house in a tee shirt. Wasting money, resources and thinking is sooo 20th century.