relatively high degree of concern about the impact of energy on the ..... 4 See our initial report, op. cit., for an exp
University of Michigan Energy Survey Results through January 2014
John DeCicco, Diego Horna Munoz and Lisa Neidert University of Michigan Energy Institute and Institute for Social Research June 2014
www.energy.umich.edu
www.home.isr.umich.edu
Table of Contents Introduction
1
Degree of Concern about Energy-Related Issues
1
Intensity of concern
3
Views on Energy Reliability
4
Views of Energy Affordability
5
Expected change in home energy bills
7
The affordability of gasoline
9
Gasoline price expectations
11
Views on Energy and the Environment
11
Sources of energy believed to most affect the environment
12
Expectations regarding the impact of energy on the environment
12
Conclusion
13
ii
University of Michigan Energy Survey Results through January 2014
Introduction Energy is a major issue that affects consumer well-being, the environment and the economy. Building on the university's long-running Surveys of Consumers (SCA),1 the University of Michigan Energy Survey gauges American consumers' attitudes about major energy-related concerns including affordability, reliability and impact on the environment. The Energy Survey runs quarterly as an 18-question rider on the SCA in January, April, July and October of each year; it first ran in October 2013. This report covers data through the second sample, taken in January 2014, and presents both comparative and combined results from these first two samples. Further background on the design and methodology of the U-M Energy Survey can be found in the initial report.2 The new data confirm the key findings from the initial survey, including consumers' relatively high degree of concern about the impact of energy on the environment and the greater concern they express about increases in gasoline prices than about increases in home energy bills. A number of other findings remain consistent across the two samples and their significance is therefore strengthened in the pooled sample that combines October 2013 and January 2014 data. We find a hint of seasonal and energy price volatility effects that may reflect the higher prices experienced for some fuels and some regions over the winter. Thus, for some results, we are finding greater statistical power while other analyses are only suggestive at this point and must await additional data.
Degree of Concern about Energy-Related Issues The January 2014 survey confirms one of the most notable findings from the October 2013 survey, namely, that respondents are at least as concerned about the effect of energy on the environment as they are about the affordability of energy. In fact, as seen in Figure 1, with the combined sample the 58% share of those who expressed a fair amount or great deal of concern about the impact of energy on the environment statistically edges out the 53% share who
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Figure 1. American consumers' energy-related concerns expressed similar degrees of concern about affordability. Respondents were relatively less concerned about reliability. Figure 1 also illustrates the similarity in responses across the two surveys. No statistically significant differences in the results are apparent between the October and January data, and the combined sample strengthens the significance of the findings. The shares of consumers who worry about the affordability and environmental impact of energy are significantly greater than the roughly 30% share who worry about reliability. This result is based on a series of questions that ask respondents about their degrees of concern about these three energy-related issues: How much do you personally worry about the reliability of energy? Would you say a great deal, a fair amount, only a little, or not at all? How much do you personally worry about the affordability of energy? Would you say a great deal, a fair amount, only a little, or not at all? How much do you personally worry about the environmental impact of energy? Would you say a great deal, a fair amount, only a little, or not at all?
These questions were posed near the end of the interview so that the respondents had already become familiar with the aspects of energy being addressed. To measure these attitudes, we used a balanced four-level scale as described in the adjoining box.
2
The U-M Energy Survey has several
Why a 4-point scale?
classification variables including self-reported household income, home status (rent vs. own with home owners' self-reported home value), geographic region and self-reported knowledge of energy. We found that the respondents' degrees of concern about the reliability and affordability of energy varied according to income bracket, but that the degree of concern about the impact of energy on the environment did not. Regarding energy reliability, respondents in
In selecting a measurement scale for questions about degree of concern, a first decision was whether to use a bipolar or unipolar scale. Our cognitive interviews indicated that a bipolar scale confused respondents, who had difficulty seeing the choices in such black-and-white terms (as in an "agree" vs. "disagree" question). We therefore adopted a unipolar approach, to assess degrees along a continuum of concern. Although the literature suggests that the optimal length for a unipolar scale involves 5 gradations, for our questions we felt that it would not be meaningful to have a midpoint (e.g., "neither affordable nor unaffordable"). We therefore adopted a balanced 4-point scale without a neutral midpoint.
the top tercile of self-reported household income are significantly less concerned than those in the bottom tercile. In the case of energy affordability, those in the income top tercile are significantly less concerned about this than those in the middle and bottom terciles. Our samples to date both suggest that consumers' degree of concern about the impact of energy on the environment does not vary by income, home status, region or self-reported knowledge of energy. The share of respondents that worry a great deal or a fair amount about this aspect of energy is close to 60% across all of these controls. Intensity of concern As shown in Figure 1, collapsing the four response choices into two (a great deal or a fair amount versus only a little or not at all) indicates similar overall levels of concern about the affordability of energy and its impact on the environment, with the environmental concern showing a slight edge in the combined sample. However, if we look more closely at the responses, is the intensity of concern similar for these two issues? Table 1 shows the distribution of responses to the worry about questions for the combined October 2013 and January 2014 samples. For examining this question, we define an intensity of concern metric as the ratio of those who responded "a great deal" to the sum of those who responded either "a great deal" or "a fair amount." A converse ratio can be defined for the intensity of not worrying; these metrics are shown at the bottom of the table. This intensity of concern metric shows that of those who expressed some degree of worry about affordability, 31% had “a great deal” of concern. Of those concerned about the impact of energy on the 3
Table 1.
Detailed responses to the Worry About questions for the U-M Energy Survey combined sample, Oct 2013 and Jan 2014 The extent to which consumers worry about:
Response
Environmental Impact of Energy
Affordability of Energy
Reliability of Energy
A great deal A fair amount Only a little Not at all
22.6 35.8 29.6 12.0
16.5 36.7 35.6 11.2
9.4 20.6 38.3 31.7
A great deal/A fair amount Only a little/Not at all
58.4 41.6
53.2 46.8
30.0 70.0
Intensity* of Worry Intensity* of Not Worry
38.7 28.9
31.0 23.9
31.4 45.2
* Intensity is defined for Worry as [A great deal ÷ (A great deal + A fair amount)] and for Not Worry as [Not at all ÷ (Not at all + Only a little)]
environment, 39% had the more intense degree of concern. For reliability the level of intensity (31%) among those who worry about it is similar to the level of intensity for those concerned about affordability, even though the overall level of concern about reliability is lower. Therefore, it appears that concern about the impact of energy on the environment exhibits a higher degree of intensity in addition to appearing slightly greater overall than concern about affordability. Looking at the intensity of "not worrying," given in the last line of the table, shows that the share of those who are relatively unconcerned who are in fact "not at all" worried about an issue is highest (45%) for reliability. Regarding affordability and environmental impact, less than 30% of respondents said that they were not at all worried.
Views on Energy Reliability Consumers were asked their views on the reliability of energy sources. They had the following options: not at all reliable, slightly reliable, moderately reliable, or very reliable. They were also asked to state what energy sources they were referring to when they referred to the reliability of energy. In January 2014, 70% of respondents consider the energy they use as very reliable; this is not significantly different from the 75%, figure obtained from the October 2013 survey; the combined sample yielded an average of roughly 72%. In the October 2013 survey, the views on
4
Figure 2. Consumer perceptions of energy reliability by income
energy reliability varied across home tenure and property value; however, these differences were not significant in January 2014, although the differences followed the October 2013 pattern. On the other hand, perceptions of energy reliability varied by tercile of self-reported income in both the October 2013 and January 2014 data samples. For the combined sample, 75% - 80% of consumers in the top two income terciles considered their energy to be very reliable while the respective figure for the bottom tercile is only about 60% (Figure 2). In this latest survey, electricity was the dominant response for the energy source consumers were referring to, given by roughly 59% of consumers, while natural gas ranked second at roughly 23% of respondents. They were followed by gasoline, oil and petroleum with nearly 12%. The October 2013 survey yielded the same ordinal pattern. Similar to the October 2013 survey results, some regional variation was observed. However, the differences across regions in this latest survey were not large enough to be significant.
Views of Energy Affordability We asked consumers a series of questions about their most recent home energy bill, the types of energy covered by the bill and the dollar amount at which they would consider the bill to become unaffordable. Answers to these three questions allowed us to compute the percentage by which energy bills would have to increase in order for them to be seen as unaffordable by consumers.
5
The January 2014 survey indicated that a home energy bill increase of 130% (by factor of 2.3) is considered unaffordable. This value is significantly smaller than the roughly 170% increase that was considered unaffordable based on responses to the October 2013 survey. In both cases, the percent increases are relative to the energy costs experienced by the respondents when the survey was taken. From October 2013 to January 2014, the average selfreported monthly energy bill rose by roughly 22%, from $170 to $208, an increase significant at the 95% level (Figure 3). However, the respondents' average estimate of how high their energy bills would need to be to become unaffordable did not increase significantly. Given the larger variation in responses to such a question, the change in this estimate from $408 in October to $428 in January is well below the level of significance. Therefore, the two samples (which had no overlap) appear consistent in terms of the absolute level of home energy bills that consumers consider unaffordable, which averages roughly $420 across the two samples. Although the rise in costs reported in January could be consistent with a seasonal increase in heating needs, at this point we cannot say whether consumers' views on the level of energy bill considered to be unaffordable reflect seasonal influences. Weather and market factors can affect costs; on the other hand, seasonal variations may be less salient for households enrolled in “budget billing” plans designed to smooth out seasonal variability.
Figure 3. Consumers' monthly home energy bills: average self-reported current bill and average bill level that is considered unaffordable
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Figure 4. Percent increase in energy bill that would be unaffordable, by income
Differences in the home energy bill increase that consumers consider unaffordable were again found across income categories and home status categories. Households in the top income tercile believed that increasing their current energy bill by roughly a factor of 2.7 would make it unaffordable, while households in the bottom and middle income terciles believe that a doubling (roughly a factor of 2.0 increase) of energy bills would render it unaffordable. As seen in Figure 4, the mean increase in energy bills that would be considered unaffordable by households in the bottom and top income terciles did not differ significantly between the October 2013 and January 2014 samples. However, the percentage energy bill increase reported to be unaffordable by households in the middle income tercile decreased significantly, from an average of 160% based on the October response down to roughly 98% for the January responses. A similar pattern holds when comparing responses on this topic across home status categories. The responses to this series of questions allows us to estimate the fraction of consumers who deem their current home energy bill to be unaffordable. This fraction is equal to roughly 5% and it has not varied significantly between the October 2013 survey and the January 2014 survey or across region, income, home status or self-reported knowledge of energy. Expected change in home energy bills Consumers were also asked what they expect their energy bill to be five years from now. On average, consumers expect that their home energy bills will increase by about 30%. 7
Figure 5. Energy bill increase expected five years from now by home tenure and property value In contrast to the October 2013 survey, the January 2014 responses did not reveal significant differences across regions or income terciles. On the other hand, as seen with the October 2013 data, we found significant differences by home tenure status and across selfreported property values. As seen in Figure 5, the energy bill increase expected within each category did not differ significantly from October to January. The combined sample (shown by the green bars) suggests that the energy bill increase expected by consumers in the middle and top terciles by property value is significantly lower than the increase expected by renters. Also, in contrast to the October 2013 sample (blue bars), when the expected energy bill increase was essentially the same across home value terciles, the January 2014 sample finds bottom tercile respondents expecting a higher rise in their home energy bills than respondents in the middle and top terciles by property value. Analyzing responses about the expected increase in home energy bills in combination with those on the degree of increase considered unaffordable enables us to compute the share of consumers who implicitly expect their energy bills to become unaffordable in five years. This fraction averages roughly 20% overall. Cross-tabulating the January 2014 results by region again reveals geographic variability, but as shown in Figure 6, the pattern differs from what was seen in the October sample. The one statistically significant change is a notable jump in the number of respondents in the Northeast who believe that their bills will become unaffordable in five years.
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Figure 6. Fraction of U.S. consumers who expect their home energy bills to become unaffordable in five years, by region Nevertheless, the overall variability within and across the two samples is such that no regionally significant pattern is apparent for the combined sample. We will have to wait for additional data to see if significantly stable geographic differences emerge in the responses to the question about the expected future affordability of home energy bills. We again found significant differences in responses on this topic by income. The share of households in the top income tercile who expect energy bill to become unaffordable in five years is significantly smaller than the corresponding share in the bottom tercile. This pattern was observed in the October 2013 survey, the January 2014 survey and combined results. We did not find significant differences by home status in January 2014. The affordability of gasoline The U-M Energy Survey also asked consumers how high the price of gasoline would have to be before they would find it unaffordable. If respondents could not answer in dollars, they were asked the percentage increase and the answer was converted to dollars based on the national average gasoline price of $3.39 per gallon in January 2014, when the survey was taken.3 On average, U.S. consumers believe that gasoline would become unaffordable if it reached $5.96, which equates to an increase of 83% and does not differ significantly from the $5.90 estimate based on the October 2013 survey. We found significant differences across income terciles and across home tenure and property value terciles. As seen in the October 9
survey, the gasoline price that households in the top income tercile deemed unaffordable is significantly higher than the price that the middle and bottom income terciles say would be unaffordable (in the sense of requiring them to make significant changes in the way they travel). In the January survey, top income tercile respondents on average believe that $6.75 per gallon would be unaffordable, a threshold that is markedly higher than the roughly $5.50 per gallon average price that is considered unaffordable by middle and bottom income tercile respondents. A similar difference is seen between homeowners in the top tercile and those in the middle and bottom terciles of self-reported property value. By comparing the price at which gasoline would become unaffordable to the current price of gasoline, we can compute the fraction of the population that implicitly considers gasoline to already be unaffordable. This figure is quite small, about 3%, and did not differ significantly across any of our classification variables. Just as we saw in the initial U-M Energy Survey, consumers revealed that they would tolerate a much higher increase in home energy bills than they can in gasoline prices before viewing the cost as unaffordable. The average percent increases deemed unaffordable based on the October 2013 and January 2014 data are shown in Figure 7. The gasoline price results are essentially identical for the two samples, which found that an increase averaging 84% would be seen as unaffordable. As discussed above in the section on home energy bills, the degree of
Figure 7. Degrees of increase in home energy bills and gasoline prices that consumers consider to be unaffordable
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increase considered unaffordable dropped in the January sample compared to the October sample, a finding in line with the higher baseline energy bill (which increased from October to January) and unchanged views of the absolute dollar level of home energy bills respondents felt they could not afford. In short, consumers are consistently articulating a much greater sensitivity to gasoline price hikes than to increases in home energy bills. Gasoline price expectations When asked how they thought gasoline prices to change over the next five years, January 2014 respondents reported an average expectation of $3.72 per gallon, a level 10% higher than the $3.39 per gallon national average pump price that month. No significant variation in this expectation was observed by region, income, home status or knowledge of energy. Combining these responses with those on the gasoline price consumers would consider unaffordable, we found that on average 12% of respondents implicitly expect gasoline to become unaffordable in five years. This estimate is the same based on both the October 2013 and January 2014 surveys. Here we did find significant variations according to self-reported income and home status. As expected, the roughly 5% share of top income households that expect gasoline to become unaffordable is notably smaller than the 18% of those in the bottom income tercile who felt it would be unaffordable in five years. Similar results are seen when segmenting the data by the respondents' self-reported property values.
Views on Energy and the Environment Consumers were asked the extent to which energy use in everyday life affects the environment using a 4-point scale of not at all, a little, a fair amount or a lot. After answering this question, they were asked to state which environmental domain they believe is affected the most: air, water, global warming or personal health.4 According to the January 2014 survey responses, about three-quarters of consumers believe that energy use affects the environment by at least a fair amount. This result is consistent with the October 2013 survey and no significant differences were observed across regions, income bracket, home status or self-reported knowledge of energy. As also seen in the October results, air was viewed as the environmental domain mostly affected by energy use (46%), followed by global warming (24%), and then personal health and water (both with 15%).
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Sources of energy believed to most affect the environment Interviewers asked respondents which source of energy they thought affected the environment the most, without prompting them about any specific source. Answers to this open-ended question yielded the results listed in Table 2. Table 2.
Responses to question about which source of energy consumers believe affects the environment the most
Responses
percent
Responses
percent
Gasoline, oil or petroleum
36
Pollution
1.0
Coal
17
Power plants
1.0
Electricity
13
People, cities
0.9
Fossil fuels
8
Fracking
0.6
Natural gas
6
All
0.2
Emissions
3
Chemicals
0.2
Biofuels, wood
2
None
0.2
Water pollution
1.9
Solar/wind
0.2
Automobile exhaust
1.7
Electromagnetic fields
0.1
Factories
1.3
Hydroelectric dams
0.1
Nuclear
1.2
Don’t know / no answer
4
Source: U-M Energy Survey combined sample, Oct 2013 and Jan 2014
The distribution of responses was very similar across the two surveys. A majority (roughly twothirds) of respondents identified fossil-related forms of energy (gasoline and other petroleumrelated responses, coal, natural gas or generic "fossil fuels" responses) as those that most affect the environment. Approximately 15% of respondents identified electricity or power plants. The remaining answers included other items, including responses unrelated to fossil fuels or electricity and in some cases items that are not sources of energy per se. Expectations regarding the impact of energy on the environment Consumers were asked whether they expected energy use in everyday life to affect the environment more, less or about the same in the next five years. Roughly 86% of respondents said that they expect the impact of energy on the environment to increase. We found no significant differences when cross-tabulating this by region, income, home status or self-reported knowledge of energy. The same pattern was observed in the October 2013 survey results.
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Conclusion Data from the January 2014 U-M Energy Survey show that two key findings from the October 2013 data were confirmed: American consumers are at least as concerned about the impact of energy on the environment as they are about its affordability; and consumers express much greater concern about increases in gasoline prices than they do about their home energy bills. Unsurprisingly for energy costs and affordability, the most well-off consumers (whether by selfreported income or by home value) are less concerned than consumers in the middle and bottom two terciles. As far as reliability is concerned, it is the bottom tercile that stands out in terms of worry in comparison to the middle and top terciles. Regarding the impact of energy on the environment, it is notable that the relatively high degree of concern remains consistent across income brackets as well as across other classification variables. In summary, the most notable findings of the survey have held up with the second sample. Further data will be needed to see whether other patterns (such as those that might be related to regional or seasonal effects) emerge, which can only be detected with significance as larger cumulative samples are obtained.
1
Thomson Reuters/University of Michigan Surveys of Consumers, http://www.sca.isr.umich.edu/
2
University of Michigan Energy Survey, initial report (March 2014). http://energy.umich.edu/sites/default/files/UM%20Energy%20Survey%20Report%2019Mar%2714.pdf 3
U.S. Energy Information Administration. “Petroleum & Other Liquids – Weekly Retail Gasoline and Diesel Prices,” accessed May 3, 2014. http://www.eia.gov/dnav/pet/pet_pri_gnd_dcus_nus_m.htm; all prices are in current US$ as of January 2014. 4
See our initial report, op. cit., for an explanation of how this portion of the survey was designed.
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