Do Bigger Houses Need More Energy? Not Quite
(Bloomberg Opinion) -- Earlier this month, IKEA Group published its annual Life at Home report, which surveys more than 22,000 people in 22 countries. It’s an intriguing look at what the home-furnishings giant describes as the “four dimensions that are shared by everyone, no matter where or how we live — space, place, relationships and things.” Two of those elements, space and things, have implications for the world’s builders and its energy providers.
According to Ikea’s report, 64 percent of those surveyed say they would rather “live in a small home in a great location compared to a big home in a less ideal location.” That might be true globally — or true of its particular clientele — but it’s not really the case in the U.S. According to census data, the average square footage of a newly built house in the U.S. has grown by almost 60 percent in the past 45 years. (The only significant break in the trend came after the financial crisis in 2008 and 2009, though it’s worth noting that even during an expanding economy, new home sizes have been shrinking slightly.)
Bigger houses hold more things, many of which consume electricity; multiply that by a growing population, and the result should be an expanding market for residential electricity sales.
It’s not. According to U.S. Energy Information Administration data, U.S. power companies now serve one-third more customers than they did in 1990 and sell 50 percent more power. But total sales and sales per customer peaked in 2010, during an economic downturn, and they’ve been falling since. On a per-customer basis, electricity sales in megawatt-hours are up less than 10 percent over the past 28 years.
We can credit greater efficiency in general, including for big items like refrigerators and water heaters as well as for lighting. More striking is the trend in smaller electronics: Even with bigger houses, and the need to heat and cool them, Americans are plugging in fewer electronics, which serve multiple purposes and are significantly more efficient than what they replace. For example, a digital cable set-top box with recording capability consumes more than 43 watts in standby mode, while an Apple TV digital media player consumes less than one-third of a watt. It’s an efficiency improvement that is structural, not cyclical.
For an industry that sells electrons, it’s a challenging trend to manage. There’s another wrinkle, too. As the economics of distributed power generation continue to improve, more and more of it will be controlled by homes and businesses. Utilities might well have a play in managing this power or owning the assets, but they also might not.
Ikea’s idea of the home as “space, place, relationships and things” is useful for long-term thinking about our residential environment. At least in the U.S., household space is expanding; it’s “things,” at least electronic ones, that are shrinking. It’s a fascinating contradiction. “Bigger,” in this sense, doesn’t mean “more.”
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Nathaniel Bullard is an energy analyst, covering technology and business model innovation and system-wide resource transitions.
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