Energy demand

People use energy for home, work and travel. People also use energy indirectly in ways they may not think about — by purchasing goods that took energy to manufacture, package and ship; by making use of hospitals, schools and public safety services; or simply by using the Internet. Through 2040, the largest source of energy demand will be for fuels used to make electricity.

Residential/Commercial

Energy use rises with improved living standards

Three significant drivers of global energy trends — increasing population, urbanization and rising living standards — are clearly evident in the residential and commercial sectors.

The majority of the growth in energy demand used in buildings is expected to come from the residential sector, although energy for commercial and other public facilities will actually grow at a faster pace.

These energy needs reflect rising populations as well as an ongoing shift of people from rural to urban settings. This shift generally leads to greater energy use in homes and other buildings for cooking, indoor temperature control, lighting, appliances and other equipment (e.g., computer/information systems).

Demand in the residential sector is driven by two factors: the number of households and the amount of energy used per household (energy intensity). The total number of households in the world will rise significantly in coming decades; we expect an increase of close to 50 percent, from 1.9 billion households in 2010 to 2.8 billion by 2040, due to increasing population and urbanization.

At the same time, urbanization and rising incomes — particularly in China, India and the other 10 key growth countries — are driving demand for energy not just for basic needs but also modern such as air conditioning, appliances and electronics. In rural China, there are only 16 air conditioners for every 100 households; in urban areas, that ratio is 112 per 100.

Much of the underlying growth in residential energy demand, however, will be offset by the fact that household energy use continues to reflect efficiency gains. For example, according to the Energy Information Administration (EIA), U.S. homes built after 2000 consume about the same amount of energy as older homes despite being, on average, 30 percent larger.

Globally, residential energy intensity is projected to fall by about 15 percent over the

Outlook period as homes become better insulated and make greater use of energy-saving lighting and appliances.

Accounting for all of these factors, energy demand in the residential sector is expected to rise by about 20 percent from 2010 to 2040, with growth tapering after around 2030 as China’s urbanization begins to slow and residential energy demand in mature OECD economies actually declines.

Rising living standards and urbanization will also enable many people to change the types of fuel they use in their homes. The world will see a continued shift toward electricity and natural gas and away from biomass fuels, like wood, which today still account for approximately 40 percent of global residential energy needs.

By 2040, electricity will likely account for around one-third of residential energy demand, compared to 20 percent in 2010. Another fuel source that should see large growth is natural gas.

The shift away from less-efficient fuels like wood in the residential sector will help people in developing countries improve their quality of life without necessarily increasing their overall energy use.

In fact, one of the great challenges over the Outlook period will be extending access to the 1.3 billion people who are without electricity and 2.6 billion people who lack modern cooking facilities.

Significant trends are also seen in the commercial sector, which includes energy used in offices, retail stores, hospitals and schools. Globally, commercial demand for energy is rising, with growth projected to gradually slow toward 2040. In addition, a greater share of commercial energy use is likely to come from electricity rather than the direct use of fuels such as oil or coal. Commercial demand should rise by about 50 percent from 2010 to 2040.

Combined, total residential and commercial energy demand is projected to rise by around 30 percent from 2010 to 2040.

The residential/commercial sector is a growing contributor to electricity demand, ultimately leading to greater demand for the fuels used by utilities and other power generators.