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What do customers want from improved residential electricity services? Evidence from a choice experiment

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  • Huh, Sung-Yoon
  • Woo, JongRoul
  • Lim, Sesil
  • Lee, Yong-Gil
  • Kim, Chang Seob

Abstract

Improvements in customer satisfaction as well as product/service quality represent a common objective of all businesses, and electricity services are no exception. Using choice experiments and a mixed logit model, this study quantitatively analyzes customers' preferences and their marginal willingness to pay for improved residential electricity services. The study provides an ex ante evaluation of customers' acceptance of hypothetical electricity services. According to the results, customers consider the electricity bill and the electricity mix as the two most important attributes when choosing their electricity services. Customers are willing to pay 2.2% more in the average electricity bill (an additional monthly electricity bill of KRW 1,064; USD 0.96) for a significant increase in the share of renewable energy, which is far less than the actual cost of achieving this renewable target. Therefore, it is better to maintain the current electricity mix in principle, and the renewable share should be gradually expanded instead of making a sudden change in the electricity mix. In addition, customers are willing to pay KRW 6,793 (USD 6.15) more to reduce blackouts once in a year and KRW 64/year (USD 0.06/year) to reduce a minute of each blackout.

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  • Huh, Sung-Yoon & Woo, JongRoul & Lim, Sesil & Lee, Yong-Gil & Kim, Chang Seob, 2015. "What do customers want from improved residential electricity services? Evidence from a choice experiment," Energy Policy, Elsevier, vol. 85(C), pages 410-420.
    • Handle: RePEc:eee:enepol:v:85:y:2015:i:c:p:410-420
    DOI: 10.1016/j.enpol.2015.04.029
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    14. Ruokamo, Enni & Kopsakangas-Savolainen, Maria & Meriläinen, Teemu & Svento, Rauli, 2019. "Towards flexible energy demand – Preferences for dynamic contracts, services and emissions reductions," Energy Economics, Elsevier, vol. 84(C).
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    16. Fait, Larissa & Wetzel, Heike & Groh, Elke D., 2020. "Choice Preferences for Regional and Green Electricity: Influence of Regional and Environmental Identity," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224574, Verein für Socialpolitik / German Economic Association.
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    18. Mark Tocock & Dugald Tinch & Darla Hatton MacDonald & John M. Rose, 2023. "Managing the energy trilemma of reliability, affordability and renewables: Assessing consumer demands with discrete choice experiments," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(2), pages 155-175, April.
    19. Bengart, Paul & Vogt, Bodo, 2021. "Fuel mix disclosure in Germany—The effect of more transparent information on consumer preferences for renewable energy," Energy Policy, Elsevier, vol. 150(C).
    20. Curtis, John & Brazil, William & Harold, Jason, 2019. "Understanding preference heterogeneity in electricity services: the case of domestic appliance curtailment contracts," Papers WP638, Economic and Social Research Institute (ESRI).
    21. Choi, Hyunhong & Shin, Jungwoo & Woo, JongRoul, 2018. "Effect of electricity generation mix on battery electric vehicle adoption and its environmental impact," Energy Policy, Elsevier, vol. 121(C), pages 13-24.
    22. Bernadeta Gołębiowska, 2020. "Preferences for demand side management—a review of choice experiment studies," Working Papers 2020-05, Faculty of Economic Sciences, University of Warsaw.
    23. Kyuho Maeng & Sungmin Ko & Jungwoo Shin & Youngsang Cho, 2020. "How Much Electricity Sharing Will Electric Vehicle Owners Allow from Their Battery? Incorporating Vehicle-to-Grid Technology and Electricity Generation Mix," Energies, MDPI, vol. 13(16), pages 1-25, August.
    24. Moon, Sungho & Kim, Youngwoo & Kim, Minsang & Lee, Jongsu, 2023. "Policy designs to increase public and local acceptance for energy transition in South Korea," Energy Policy, Elsevier, vol. 182(C).
    25. Sung-Yoon Huh & JongRoul Woo & Chul-Yong Lee, 2019. "What Do Potential Residents Really Want When Hosting a Nuclear Power Plant? An Empirical Study of Economic Incentives in South Korea," Energies, MDPI, vol. 12(7), pages 1-17, March.

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