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

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  • Sahari, Anna

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.

Suggested Citation

  • Sahari, Anna, 2017. "Electricity Prices and Consumers' Long-Term Technology Choices: Evidence from Heating Investments," Working Papers 95, VATT Institute for Economic Research.
    • Handle: RePEc:fer:wpaper:95
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    File URL: https://www.doria.fi/handle/10024/148932
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    References listed on IDEAS

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    Cited by:

    1. Henningsen, Geraldine & Wiese, Catharina, 2019. "Do Household Characteristics Really Matter? A Meta-Analysis on the Determinants of Households’ Energy-Efficiency Investments," MPRA Paper 101701, University Library of Munich, Germany.

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    More about this item

    Keywords

    elasticity; electricity; discrete choice; consumer behavior; Environment; energy and climate policy; D12; D83; Q41; R22;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • R22 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Other Demand

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