How Much Do Households Spend on Energy

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Electricity, gas and transportation fuels represent an important component of the household budget. Their use for lighting, heating, cooling, and cooking exemplify some of the basic activities that require a reliable supply. The importance of these services in the family budget reflects this relevance, constituting in turn a dimension of interest for public policies that seek to guarantee affordability of modern energy sources. A recent IDB study  (in English) examines expenditures on electricity, domestic gas, and fuels for private transportation in households in 13 countries in the Latin American and Caribbean Region.

Collectively, direct expenditures on these energy sources constitute around 8.2% for the average Latin American household, where electricity represents 3.3%, domestic gas 2%, and fuel for private C Level Executive List transportation 2.9%. However, these figures have pronounced differences between countries and income groups. For example, the first quintile of the population (the lowest 20% of income) in Jamaica and Uruguay dedicate 10 and 15.6% of their income to energy consumption, respectively. Furthermore, in the entire sample analyzed, 30% of the low-income population dedicates more than 10% of their budgets to energy expenses. This situation indicates substantial affordability problems concentrated in lower-income segments.



As the graph above shows, the composition of energy spending is also very different between income groups. In the first quintile, electricity and gas represent more than 80% of their total energy expenditures. On the other hand, in the highest income group, these sources represent only 36%, while the difference is liquid fuels for transportation (e.g. gasoline, diesel, LPG, etc.). This change in composition reflects the greater ownership and use of motor vehicles, being a relevant dimension to take into account in subsidy policies and energy price formation. Likewise, the high concentration of aggregate energy expenditures in high-income groups is notable. For example, the 20% of households with the highest income explain around 40% of aggregate energy spending.