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Assessing the potential for consumer-driven renewable energy development in deregulated electricity markets dominated by renewables

Tom Ndebele

Energy Policy, 2020, vol. 136, issue C

Abstract: Renewable energy development in deregulated electricity markets dominated by fossil fuels has benefited from various government incentives and green marketing. Electricity generation in New Zealand is dominated by renewables and has developed with no government incentives or green marketing since the reforms in 1986. The New Zealand government has set a renewable energy target of 90% by 2025 with no direct support. The objective of this paper is to assess the potential for consumer-driven renewable energy development required to achieve this target by estimating willingness to pay for green electricity in the context of supplier choice. The study is based on a stated choice dataset generated using a choice experiment administered to an online panel of domestic electricity consumers in 2014. Results from a random parameter logit model estimated on 2688 choice responses show that, on average, consumers are willing to pay an extra $3.20 per month or 2% of their current power bills for a 10 percentage point increase in the share of electricity from renewable sources. These findings demonstrate that consumers are willing to support the development of renewables even where a market is dominated by renewables.

Keywords: Choice experiment; Willingness to pay; Green electricity; Mixed logit; Renewable energy; Consumer switching (search for similar items in EconPapers)
JEL-codes: C93 D01 D12 L94 Q48 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:136:y:2020:i:c:s0301421519306445

DOI: 10.1016/j.enpol.2019.111057

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