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Supplier choice and WTP for electricity attributes in an emerging market: The role of perceived past experience, environmental concern and energy saving behavior

Francisco Javier Amador (), Rosa González () and Francisco Ramos-Real ()

Energy Economics, 2013, vol. 40, issue C, 953-966

Abstract: This study analyzes customers' preferences and their willingness to pay (WTP) for certain service attributes in an electricity supplier choice context. Specifically, a stated preference choice experiment is conducted in the Canary Islands' residential market where limited competition exists. Preferences for different electricity suppliers and three level-of-service attributes are investigated, namely, supply reliability, share of renewable energies and availability of a complementary energy audit service. The results might be interpreted as an indication of different aspects new firms need to consider if they plan to enter in the market. There is an opportunity for new companies to establish in the market, though evidence of brand loyalty to the current company and/or significant switching costs are also found, especially in the case of older people. Regarding the estimated WTP, several results should be highlighted. First, customers who have experienced more serious outages in the past tend to show a higher WTP to reduce the outage frequency. Second, highly-educated respondents, those who state a great concern for the greenhouse gases (GHG) emissions and those who carry out energy saving actions in their homes exhibit a larger WTP for renewable energies. This empirical evidence provides useful information for authorities responsible for energy policy design.

Keywords: Choice experiments; Willingness to pay; Mixed logit; Emerging market; Renewable energy (search for similar items in EconPapers)
JEL-codes: D12 L94 Q42 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1016/j.eneco.2013.06.007

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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