Media Brief: What does net zero mean for household energy prices?
Through media briefs, we aim to provide journalists with useful factual and contextual information related to Canada’s clean energy transition. Please use this as a resource, and let us know if there are any topics that you would like to see for future media briefs.
Europe’s skyrocketing natural gas prices have brought energy costs to the forefront of public debate. As we move toward net zero, our energy systems are shifting away from fossil fuels and toward clean energy sources such as wind, solar, hydrogen, and geothermal. Proponents of fossil fuel use have implied that climate policies, like carbon pricing or other regulations, will have a negative impact on household spending, including home heating and gas for vehicles. But while fossil fuels may get more expensive in a net-zero world, a number of studies suggest that Canadians will be spending less on energy over time.
This media brief dives into the readily available information on the potential impacts of the energy transition on household energy spending in Canada.
The International Energy Agency’s World Energy Outlook 2021 found that, under current global policies, average household energy bills in advanced economies would decline between 2020 and 2050. Under a scenario where governments introduce policies to reach net zero by 2050, bills would decline even further.
- While electricity bills are set to be higher in a net-zero world due to increased use of electricity, cost savings from energy efficiency and the lack of fossil-fuel-related expenditure (like gasoline for cars and natural gas for heating) mean that overall household energy bills are lower.
- More ambitious climate policies would reduce the financial impact of fossil fuel price shocks on households, such as the recent one in Europe.
The Canadian Institute for Climate Choices’ report on Canada’s Net-Zero Future, using modelling by Navius Research, examined the proportion of household income spent on energy services on pathways to net zero—including home heating, electricity, and transportation. The report found that households across all income groups are likely to spend less in a net-zero 2050 compared to 2020. This is due to three reasons:
- Energy efficiency is set to improve, significantly reducing total energy use.
- The additional costs of clean technologies would be more than offset by the savings derived from their reduced energy consumption. While the ability to pay higher upfront costs varies by income group, public policy and program solutions such as rebates or incentives can help address this concern.
- Economic growth nationwide from 2020 to 2050 would cause average incomes to rise, meaning even if energy spending holds steady in absolute terms for some households, the share of income spent on energy would decline.
In many cases, clean electricity already costs consumers less than fossil-fuel-powered electricity.
Many climate solutions involve technologies that will save Canadians money overall, even if they cost more upfront. This is particularly relevant for transportation and buildings:
- A 2020 Clean Energy Canada report pointed out that a Canadian electric vehicle driver will save $800 to $2,000 a year in “fuel” costs compared to a gas car driver, depending on which provincial grid they plug into. They can also expect to save a few hundred dollars per year on maintenance, since EVs have far fewer parts and need less frequent repair.
- Despite often exhibiting a higher upfront purchase cost, electric heat pumps (used for heating and cooling) are cost competitive with natural gas furnaces in many parts of North America thanks to a combination of recent spikes in natural gas prices, increases in the federal carbon price, and government incentives.
- Canadian families would save $151 annually per household on average with best-in-class energy efficiency policies in place, according to 2018 modelling conducted by Dunsky Energy Consulting on behalf of Clean Energy Canada and Efficiency Canada. For families that retrofit their homes, savings would be far higher. Across the Canadian economy, such measures would lead to $1.8 billion in net residential savings and $4.9 billion in net commercial and industrial savings.