What is an energy wallet?

Energy wallet is a relatively new term coined to help describe the total amount a household spends directly on energy. This wallet could include spending on lights, heating, and transportation, as well as the equipment used to do so.

Today, many households consider electricity, gasoline, home heating expenses and natural gas bills independently without thinking about the total cost of energy for everyday living.

Why is an energy wallet important?

The term energy wallet is important because it can help households better understand total energy costs today, and how these total costs may change over time, especially as society is moving to adopt cleaner energy sources and away from fossil fuels (known as the energy transition).

As households consider investing in their homes to make them more energy efficient, changing behaviours to choose more climate friendly transportation options and to conserve energy, there are often up-front costs for equipment, but also monthly savings.

However, many households cannot afford the initial investment or do not have the option to do so; this is why affordability is an important consideration during the energy transition. In Atlantic Canada, the four provinces have the highest rates of energy poverty across Canada.

Energy poverty is defined as households that spend more than 6 per cent of their after-tax household income on home energy services.

Source: CUSP, Energy Poverty and Equity Explorer Tool

The Atlantic provinces also have a higher percentage of residents living in rural areas, who typically spend more on energy costs associated with transportation.

For governments and utilities, it is important to understand how much customers spend on energy today, and how energy use may change over time to ensure residents have access to clean, reliable and affordable energy in the future. Utilities consider rates and energy usage while, governments may need to adjust energy savings programs to help address gaps in energy affordability.

What changes your energy wallet?

The energy sources and technologies used, their costs and how efficient they are can change the makeup of your energy wallet. Your energy wallet may also be influenced by how many members are in your household, the size of your house and how much you drive, among other factors. Using less energy, based on changing your behaviour can help reduce your total energy costs.

For example, if you drive a six-cylinder SUV today, but change to a more efficient four-cylinder SUV, your efficiency will increase and your spending on gasoline will decrease. If you instead switch to an electric vehicle, your long-term spending may decrease even further because electric vehicles are more efficient and electricity is less expensive than gasoline per kilometre driven. Similarly, instead choosing to drive less and bike more or use public transportation, can reduce your total energy costs.

When determining your total energy wallet, you must also consider technology costs. For example, switching a vehicle or changing heating equipment in your home can add considerable up-front energy costs for your household.

Source: Canadian Climate Institute, The Big Switch

How could energy wallets change for Atlantic Canadians during the energy transition?

Several research reports show the energy wallet for many households in Atlantic Canada and across Canada could decrease slightly over time. Several net-zero energy modelling reports show costs decreasing in Atlantic Canada over the next 10 years, even though electricity and fuel prices are expected to increase at the same time. These future costs also include purchasing new equipment, such as heat pumps and electric vehicles.

Energy wallets are expected to decrease from a combination of more efficient technologies being used, and fuel switching to use more electricity (electrification).

Estimates for Nova Scotia and New Brunswick

For example, the Ecology Action Centre estimates the total energy costs as a share of all household expenditures in New Brunswick and Nova Scotia to decrease by 5.3% and 2.6% respectively, for average income households.

However, for some households, especially lower-income households, the energy wallet is expected to increase in the short-term.

These estimates are (of course) not guaranteed, nor do they apply to every household. One significant challenge to keep energy wallet costs from increasing in Atlantic Canada is the availability of alternative energy sources and technologies.

Firstly, households must be able to afford to make the up-front investments in new energy equipment such as heat pumps or electric vehicles. Secondly, not all new energy technologies or sources are fit with needs of every household. For example, some rural residents may not be able to switch to an electric truck with the limited towing ranges today, even if they can afford one.

Something to think about...

A missing consideration in most energy wallet calculations is a loss in government revenues from taxes collected on fossil fuel sales, such as provincial gas taxes, carbon taxes, and sales taxes. Some of these revenues fund road infrastructure, which will still be needed in the future.

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