Transaction Trends - The cost of an energy crisis for households
Although extreme gas price increases occurred two years ago, the energy crisis of 2021-2023 is still fresh in our minds. How have household energy costs evolved during and after the energy crisis? It is well-known that not everyone felt the impact of higher energy prices at the same time, but where do we stand now, two years later?
Insight into the development of household energy costs has been lacking until now
In 2024, the median increase in household energy costs was 24% above the average of 2017-18
This increase is mainly due to the energy crisis; support measures and fixed-rate contracts initially limited the rise
During the energy crisis, differences between households increased; now that fixed-rate contracts are ending, these differences are decreasing
Renters experience a greater increase in energy costs (28%) than homeowners (21%)
It’s time to take stock
We follow the development of energy costs from 2017 to 2024 based on anonymized and aggregated transaction data. Energy costs include the total annual household expenses on energy bills. [1]
Both price and consumption effects play a role in the development of energy costs. While a higher price drives up energy costs, lower consumption leads to reduced energy costs. It is fascinating to observe the combined impact of these two effects, as it provides a complete picture of the impact of the energy crisis on the annual household energy costs.
Our analysis shows that energy costs are 24% higher in 2024 compared to 2017-18. The increase occurred mainly during the energy crisis, despite government support that alleviated some of the pain.
Furthermore, the cost increases were initially limited because fixed-rate contracts are standard in the energy market. However, the consequence was that the differences in energy costs between households with expiring fixed contracts and those with ongoing fixed contracts increased significantly during the energy crisis. Now that most fixed contracts have been renewed, these differences have also somewhat decreased.
In our analysis, we also differentiate between renters and homeowners. We observe that the median development of renters' energy costs has experienced a stronger increase compared to that of homeowners.
Energy costs 24% higher since the energy crisis
First, we examine the development of household energy costs before, during, and after the energy crisis. In 2024, energy costs for the median household were approximately 24% higher than the average of 2017 and 2018, which we use as a baseline in our analysis. This increase is concentrated in 2023 and 2024, while energy costs remained relatively constant in the earlier years. During the energy crisis, energy costs experienced significant fluctuations. In 2022, the provision of energy compensation in November and December to every household in the Netherlands resulted in a reduction of energy costs by 380 euros. As a result, the index for the energy costs of the median household decreased by approximately 19%. The decrease occurred despite wholesale energy prices reaching record highs (see left figure below). In addition to government support measures, households likely adjusted their energy consumption out of fear of the energy crisis and solidarity with Ukraine.
Due to fixed-rate contracts and government support, households were affected by energy price increases only later. In 2023, we observed that an increasing number of households were exposed to higher prices, leading to an increase in median energy costs. This increase continued into 2024. Ultimately, in 2024, the median increase was 24% compared to 2017-2018.
To get a sense of the magnitude of this 24% increase, we compare it with the development of consumer inflation (CPI, excluding energy). It should be noted that the CPI excluding energy only captures price changes, while energy costs account for both price changes and behavioral changes (reduced consumption). Although they follow different trajectories, the indices of median energy costs and the development of the price level are nearly equal in 2024. While the price level increases steadily over the years, the development of energy costs shows significant fluctuations.
Looking ahead, a significant decrease in household energy costs seems unlikely. for gas prices indicate only a slight decrease in 2025 and 2026. From a historical perspective, energy prices remain at a high level. Therefore, any reduction in household energy costs will need to come from savings on energy consumption.
Differences between households increased during the energy crisis
Fixed-rate contracts also caused the differences between households to increase significantly during the energy crisis and decrease again at a later stage. In the left figure below, in addition to the median development of energy costs (yellow line), we now also see the 90th and 10th percentiles. The green area illustrates the spread among households. How can this best be interpreted? Eighty percent of households in our dataset experienced a development of energy costs within the green area. We observe that during the energy crisis, the gap between the 90th and 10th percentiles increased significantly. This indicates that the differences in the development of energy costs among households grew substantially. Initially, the increase in energy costs took some time to manifest, but from the onset of the energy crisis, differences between households widened.
In 2024, we see, from the smaller gap between the 10th and 90th percentiles, that the spread among households started decreasing again. There are two reasons for this. First, during the energy crisis, fewer fixed contracts were signed and more variable-price contracts were agreed upon, allowing more households to benefit from energy price decreases once the price peak had passed. Second, the proportion of households with fixed (low) prices from before the energy crisis continued to shrink, reducing the spread at the lower end of the distribution. This means that households that initially benefited from low energy prices now also faced higher energy costs. The result of these two effects is that the spread among households starts decreasing in 2024 again.
Energy costs for renters increased more than for homeowners
During the energy crisis, a distinction was often made between homeowners and renters. These two groups do not have the same options to respond to a price change. Consumption can be reduced through behavioral adjustments, but also through the home insulation. Someone living in a rental property can often only adjust their behavior, while a homeowner also has the option to make energy-saving investments. When we divide our dataset into renters and homeowners, we indeed observe differences in the median development of energy costs.
Renters generally have lower energy bills than homeowners. For illustration, the energy bill of the median renter is more than 30% lower. This difference means that initially renters experienced a greater reduction in their energy costs in 2022, as the €380 energy compensation was the same for both groups.
Over time, the energy cost index for renters became higher than that for homeowners. In 2024, the median renter’s energy costs were 28% higher compared to the base years 2017-18. Homeowners, on the other hand, saw a median increase of just 21%. To get a sense of these two percentages, we again compare them with the development of the consumer inflation index excluding energy. We see that the increase in energy costs for renters is about 5% higher than inflation. For homeowners, the increase is about 3% below, a significant difference.
Changes in energy costs can also stem from changing circumstances, such as more working from home, which generally leads to higher energy consumption, or family expansion, which also results in higher energy costs, while children leaving home leads to lower consumption. Our dataset does not provide a definitive explanation for the difference between renters and homeowners. It seems likely that both groups experience similar life events on average. The difference likely arises from the possibilities for behavioral adjustment and home insulation. Homeowners consume more energy on average and therefore have higher energy bills. This offers more opportunities to save through behavior change. Homeowners also have more options to take energy-saving measures. They are less dependent on the cooperation of the landlord and, on average, have more financial leeway.
[1] For an average household, these energy costs account for approximately 10% of total fixed costs, with a slightly higher percentage for those on benefits or pensions.
