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Quality Uncertainty and the Market for Renewable Energy: Evidence from German Consumers

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  • Rommel, Jens
  • Sagebiel, Julian
  • Müller, Jakob R.

Abstract

Consumers can choose from a wide range of electricity supply contracts, including green power options. Electricity produced from renewable energy involves information asymmetries. With a sample of more than 2,000 German electricity consumers, we tested the proposition of a “lemon market” for renewable energy in a discrete choice experiment. Specifically, we found that, compared to investor-owned firms, additional willingness-to-pay (WTP) for renewable energy is approximately double when offered by cooperatives or municipally-owned electricity utilities. Consumers who are experienced with switching suppliers have an additional WTP of one Eurocent per kilowatt hour for cooperatives and two Eurocents for public enterprises. The results demonstrate that organizational transformation in dynamically-changing electricity markets is not only driven by political initiatives but also by consumers’ choices on the market. Public policy may reduce information asymmetries by promoting government labeling of green energy products.

Suggested Citation

  • Rommel, Jens & Sagebiel, Julian & Müller, Jakob R., 2015. "Quality Uncertainty and the Market for Renewable Energy: Evidence from German Consumers," MPRA Paper 66195, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:66195
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Sagebiel, Julian, 2017. "Preference heterogeneity in energy discrete choice experiments: A review on methods for model selection," Renewable and Sustainable Energy Reviews, Elsevier, vol. 69(C), pages 804-811.
    2. repec:eee:eneeco:v:75:y:2018:i:c:p:440-448 is not listed on IDEAS
    3. repec:gam:jsusta:v:11:y:2019:i:4:p:1098-:d:207377 is not listed on IDEAS
    4. repec:eee:enepol:v:118:y:2018:i:c:p:325-345 is not listed on IDEAS
    5. repec:eee:enepol:v:118:y:2018:i:c:p:160-168 is not listed on IDEAS
    6. Hackbarth, André, 2018. "Attitudes, preferences, and intentions of German households concerning participation in peer-to-peer electricity trading," Reutlingen Working Papers on Marketing & Management 2019-2, Reutlingen University, ESB Business School.
    7. repec:eee:enepol:v:107:y:2017:i:c:p:413-424 is not listed on IDEAS
    8. Johannes Dahlin & Verena Halbherr & Peter Kurz & Michael Nelles & Carsten Herbes, 2016. "Marketing Green Fertilizers: Insights into Consumer Preferences," Sustainability, MDPI, Open Access Journal, vol. 8(11), pages 1-15, November.
    9. repec:eee:enepol:v:129:y:2019:i:c:p:1355-1363 is not listed on IDEAS
    10. Roth, Lucas & Lowitzsch, Jens & Yildiz, Özgür & Hashani, Alban, 2016. "The impact of (co-) ownership of renewable energy production facilities on demand flexibility," MPRA Paper 73562, University Library of Munich, Germany.

    More about this item

    Keywords

    Cooperatives; Discrete Choice Experiment; Germany;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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