Determinants of price mark‐up tolerance for green electricity – lessons for environmental marketing strategies from a study of residential electricity customers in Germany

Torsten J. Gerpott and Ilaha Mahmudova

Business Strategy and the Environment, 2010, vol. 19, issue 5, 304-318

Abstract: This paper develops hypotheses on the effects of various attitudinal and perceptual variables as well as socio‐demographic characteristics of residential electricity customers on an individual's willingness to pay a mark‐up for electricity generated from renewable energy sources compared with the price due for electricity from conventional sources. The hypotheses are tested with data from a standardized telephone survey of 238 household electricity consumers in Germany. 53.4% of the participants are willing to pay a mark‐up for green electricity. 26.1% report a price tolerance equal to a 5–10% increase in their current electricity bill. Binary logistic and ordinal regression analyses indicate that price tolerance for green electricity is particularly influenced by attitudes (1) towards environmental issues and (2) towards one's current power supplier, (3) perceptions of the evaluation of green energy by an individual's social reference groups, (4) household size and (5) current electricity bill level. The findings are used to derive suggestions for energy related informational activities of public institutions, green marketing strategies of energy companies and future consumer research regarding demand for pro‐environmental goods. Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment.

Date: 2010
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