Pricing of Biomethane Products Targeted at Private Households in Germany—Product Attributes and Providers’ Pricing Strategies

Carsten Herbes, Lorenz Braun and Dennis Rube
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Carsten Herbes: Institute for International Research on Sustainable Management and Renewable Energy (ISR), Nuertingen-Geislingen University, Neckarsteige 6–10, Nuertingen 72622, Germany
Lorenz Braun: Faculty of Agriculture, Economics and Management (FAVM), Nuertingen-Geislingen University, Neckarsteige 6–10, Nuertingen 72622, Germany
Dennis Rube: Institute for International Research on Sustainable Management and Renewable Energy (ISR), Nuertingen-Geislingen University, Neckarsteige 6–10, Nuertingen 72622, Germany

Energies, 2016, vol. 9, issue 4, 1-15

Abstract: In the effort to combat global warming, renewable energies play a key role. However, most efforts are still focused on the electricity market, so renewables remain underrepresented in the heat market. Biomethane derived from biogas is an intriguing option for using renewable energy to generate heat in residential homes. However, biomethane comes at a significantly higher cost than natural gas, meaning providers have to ask a price premium from consumers. Determining a pricing strategy is thus of crucial importance. Besides cost, providers have to consider consumers’ willingness-to-pay (WTP) for the product. We propose that they could draw on existing research on WTP for green electricity, albeit with some important modifications and scarce research on biomethane. To explore this proposition, we performed a first-of-its-kind analysis of providers’ pricing strategies for biomethane, using both providers’ published data and data provided in response to e-mail queries. Based on the features and prices of 165 biomethane-based gas products for private households in Germany, we find that features that could, according to existing research, elicit a higher WTP are not priced accordingly. As the consumer market for biomethane is still in its early development, our results suggest opportunities for providers to ask higher prices for certain biomethane-based gas products.

Keywords: biomethane; biogas; price; pricing; marketing; willingness-to-pay (WTP); consumer; renewable energy; Germany (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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