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Electricity Prices and Consumers' Long-Term Technology Choices: Evidence from Heating Investments

Anna Sahari

No 95, Working Papers from VATT Institute for Economic Research

Abstract: This paper studies consumers' sensitivity to energy costs at the moment of making a long-term energy technology investment. The analysis exploits within-region variation in local, regulated electricity distribution prices that are very persistent over time and therefore a good measure of long-term price expectations. Price impacts are estimated on extensive administrative registry data of private persons acting as home builders in Finland during 2006-2011. The results show that electricity prices notably influence builders' heating choices, and price increases that are mostly due to taxation have induced demand for technologies based on renewable energy. However, the results on the comprehensive set of observable individual-level characteristics imply that issues related to information and credit availability may hamper price sensitivity.

Keywords: elasticity; electricity; discrete choice; consumer behavior; Environment; energy and climate policy; D12; D83; Q41; R22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-reg
Date: 2017
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