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Financial Literacy and Electricity Contracts

Author

Listed:
  • Mark Tocock
  • Darla Hatton MacDonald
  • Dugald Tinch
  • John M. Rose

Abstract

Using a discrete choice experiment, owner occupants of non-apartment dwellings in Victoria, Australia were asked to evaluate alternative electricity contracts with features including increased renewables, different technologies, and demand-side management policies. We assert that a respondent’s financial literacy is correlated with whether they perceive the contract features as investments. To test this, respondents completed a financial literacy quiz, with their corresponding scores used as an indicator of financial literacy. These scores were incorporated within a hybrid mixed logit model to evaluate whether financial literacy explains the variation in choices. Results indicate that respondents with higher levels of financial literacy had a higher willingness to pay for the contract features. This case study is relevant for an environment of rising electricity prices and the transition to greater reliance on renewables. JEL Classification: Q40, Q41, Q51

Suggested Citation

  • Mark Tocock & Darla Hatton MacDonald & Dugald Tinch & John M. Rose, 2025. "Financial Literacy and Electricity Contracts," The Energy Journal, , vol. 46(6), pages 91-113, November.
    • Handle: RePEc:sae:enejou:v:46:y:2025:i:6:p:91-113
    DOI: 10.1177/01956574251340291
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    References listed on IDEAS

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    1. Koomson, Isaac & Churchill, Sefa Awaworyi & Smyth, Russell, 2025. "Financial literacy and clean energy adoption in South Africa," Energy Economics, Elsevier, vol. 151(C).

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    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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