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Green Power voluntary purchases: Price elasticity and policy analysis

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  • Mewton, Ross T.
  • Cacho, Oscar J.

Abstract

Green Power schemes offer electricity from renewable energy sources to customers for a higher price than ordinary electricity. This study examines the demand characteristics of Green Power in Australia and policies which could increase its sales. A sample of 250 pooled time series and cross sectional observations was used to estimate a statistically significant elasticity of demand for Green Power with respect to price of -0.96 with a 95% confidence interval of ±68%. The wide variation in market penetration between jurisdictions and between countries for Green Power, and the low awareness of Green Power found by surveys indicate that Green Power sales could be increased by appropriate marketing and government policies. The most cost effective means to increase sales was found to be advertising campaigns although only one Australian example was found, in the state of Victoria in 2005. It was also found that full tax deductibility of the Green Power premium to residential customers, exemption from the Goods and Services Tax and a tax rebate for Green Power are all probably less cost effective for promoting sales than direct government purchase of Green Power, in terms of cost per unit of increased sales.

Suggested Citation

  • Mewton, Ross T. & Cacho, Oscar J., 2011. "Green Power voluntary purchases: Price elasticity and policy analysis," Energy Policy, Elsevier, vol. 39(1), pages 377-385, January.
  • Handle: RePEc:eee:enepol:v:39:y:2011:i:1:p:377-385
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    References listed on IDEAS

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    Cited by:

    1. Raadal, Hanne Lerche & Dotzauer, Erik & Hanssen, Ole Jørgen & Kildal, Hans Petter, 2012. "The interaction between Electricity Disclosure and Tradable Green Certificates," Energy Policy, Elsevier, vol. 42(C), pages 419-428.
    2. Ma, Chunbo & Burton, Michael, 2016. "Warm glow from green power: Evidence from Australian electricity consumers," Journal of Environmental Economics and Management, Elsevier, vol. 78(C), pages 106-120.
    3. Cardella, Eric & Ewing, Brad & Williams, Ryan Blake, 2018. "Green is Good – The Impact of Information Nudges on the Adoption of Voluntary Green Power Plans," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266583, Southern Agricultural Economics Association.
    4. Hast, A. & Syri, S. & Jokiniemi, J. & Huuskonen, M. & Cross, S., 2015. "Review of green electricity products in the United Kingdom, Germany and Finland," Renewable and Sustainable Energy Reviews, Elsevier, vol. 42(C), pages 1370-1384.
    5. repec:eee:jeeman:v:84:y:2017:i:c:p:209-222 is not listed on IDEAS
    6. Rahbauer, Sebastian & Menapace, Luisa & Menrad, Klaus & Decker, Thomas, 2016. "Adoption of green electricity by small- and medium-sized enterprises in Germany," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 1185-1194.
    7. Conte, Marc N. & Jacobsen, Grant D., 2016. "Explaining Demand for Green Electricity Using Data from All U.S. Utilities," Energy Economics, Elsevier, vol. 60(C), pages 122-130.
    8. repec:eee:rensus:v:91:y:2018:i:c:p:180-192 is not listed on IDEAS
    9. repec:eee:eneeco:v:74:y:2018:i:c:p:490-502 is not listed on IDEAS
    10. Gillenwater, Michael, 2013. "Probabilistic decision model of wind power investment and influence of green power market," Energy Policy, Elsevier, vol. 63(C), pages 1111-1125.
    11. Chan, Kai-Ying & Oerlemans, Leon A.G. & Volschenk, Jako, 2015. "On the construct validity of measures of willingness to pay for green electricity: Evidence from a South African case," Applied Energy, Elsevier, vol. 160(C), pages 321-328.
    12. Ma, Chunbo & Burton, Michael P., 2013. "A Nested Logit Model of Green Electricity Consumption in Western Australia," Working Papers 148411, University of Western Australia, School of Agricultural and Resource Economics.
    13. repec:eee:renene:v:114:y:2017:i:pb:p:1062-1068 is not listed on IDEAS
    14. Golusin, Mirjana & Munitlak Ivanovic, Olja, 2011. "Kyoto Protocol implementation in Serbia as precognition of sustainable energetic and economic development," Energy Policy, Elsevier, vol. 39(5), pages 2800-2807, May.
    15. Kaenzig, Josef & Heinzle, Stefanie Lena & Wüstenhagen, Rolf, 2013. "Whatever the customer wants, the customer gets? Exploring the gap between consumer preferences and default electricity products in Germany," Energy Policy, Elsevier, vol. 53(C), pages 311-322.

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