Consumers have reduced gas use significantly in response to energy crisis

Temperature-adjusted gas consumption in Germany has fallen significantly in industry and private households in recent months. Against the backdrop of Russian gas supply freezes and the ensuing energy crisis, consumption has decreased by 19% (industry) and up to 36% (private households, small businesses) compared to the expected consumption without a crisis response. These are the new findings by a team of researchers at the Hertie School. In the working paper "Gas demand in times of crisis", Dr. Oliver Ruhnau, Clemens Stiewe, Jarusch Müßel and Lion Hirth, Professor of Energy Policy, examine the relationship between the development of gas prices and savings in industry and private households.

In industry, estimated temperature-adjusted savings increased almost fivefold, from 4% to 19%, between September 2021 and September 2022. In other words, regardless of external factors that influence gas consumption, such as the weather or general economic development, the industrial sector in Germany used 19% less gas in September than would otherwise be expected for this time of year.

Households and smaller commercial customers also started making substantial reductions in gas consumption in March 2022, reaching as much as 36% in September 2022. In addition to high prices, which sometimes reach small consumers on a delayed basis, the authors say that other explanations for these savings could include ethical reactions to Russia’s invasion of Ukraine and increased media attention on the energy crisis.

The authors also highlight the important implications of these findings for public policy, saying: “Prices are an effective means of coordinating and incentivising demand reductions. This implies that energy subsidies, many of which have been hastily introduced to mitigate the crisis, drive up natural gas consumption, which in turn will further inflate prices.” According to the authors, it is important to expose consumers to unsubsidised prices to reduce gas consumption. “Support policies and relief packages should be carefully designed to cushion hardship but keep gas savings incentives intact,” they add.

Shortly after the publication of the updated paper, the authors held a public research presentation. Watch the video here.

The full text of the paper is available here.