The combined effect of regulators’ and retailers’ actions to stimulate consumer participation in retail energy markets

• Published in: Energy policy Vol. 184; p. 113890
• Main Authors: Huisman, Hester M., de Haan, Evert, Mulder, Machiel, Wieringa, Jaap E.
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01-01-2024
• Subjects: Consumer participation; Energy retailers; Energy transition; Regulation of retail markets; Switching costs; Switching costs; Consumer participation; Energy transition; Regulation of retail markets; Energy retailers
• ISSN: 0301-4215
• DOI: 10.1016/j.enpol.2023.113890

Active consumer participation in retail markets is crucial for an affordable and sustainable energy transition. While energy regulators encourage active consumer participation through policies which decrease consumers’ switching costs, energy retailers seek to advance customer retention to boost profits. This study investigates how these seemingly opposing goals influence consumer participation in energy retail markets. Using data on the Dutch energy markets, we combine micro-economic and marketing insights through a retailer-aggregated panel vector auto-regression (VAR) model and a market-level VAR to analyse the dynamic interactions. The results indicate that the regulator affects consumer participation both directly and indirectly through energy retailers’ actions. We conclude that energy retailers’ acquisition and retention actions do not counteract the regulator’s efforts to increase active consumer participation. While retention actions lead to decreased switching behaviour, they concurrently decrease perceived switch costs while increasing search behaviour and the consideration to switch. Therefore, retention actions may still improve consumer welfare. Our research reveals mediating relations that require comprehensive examination of the overall impacts of regulatory policies and energy retailer’s actions.
•Actions of energy retailers do not counteract actions of regulators.•Energy retailers’ actions mediate regulators’ effects.•Retailers decrease switching activity, but increase other forms of participation.•Effects of regulator and retailers are mediated through the forms of participation.