Supplier choice and WTP for electricity attributes in an emerging market: The role of perceived past experience, environmental concern and energy saving behavior

• Published in: Energy economics Vol. 40; pp. 953 - 966
• Main Authors: Amador, Francisco Javier, González, Rosa Marina, Ramos-Real, Francisco Javier
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01-11-2013; Elsevier
• Subjects: Air pollution; Applied sciences; Authority; Canary Islands; Choice experiments; Competition; Cost; Customers; Developing countries; Economic data; Economics; Electric energy; Electric power; Electricity; Emerging market; Emerging markets; Energy; Energy conservation; Energy economics; Energy policy; Exact sciences and technology; General, economic and professional studies; Greenhouse effect; Loyalty; Markets; Mixed logit; Outages; Renewable energy; Renewable energy sources; Saving; Suppliers; Willingness to pay; Atlantic Ocean Islands; Canary Islands; ASE, Atlantic, Canary Is; D12; Renewable energy; L94; Emerging market; Choice experiments; Willingness to pay; Q42; Mixed logit; Choice; Service; Electric utility; Preference; Residential sector
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/j.eneco.2013.06.007

This study analyzes customers' preferences and their willingness to pay (WTP) for certain service attributes in an electricity supplier choice context. Specifically, a stated preference choice experiment is conducted in the Canary Islands' residential market where limited competition exists. Preferences for different electricity suppliers and three level-of-service attributes are investigated, namely, supply reliability, share of renewable energies and availability of a complementary energy audit service. The results might be interpreted as an indication of different aspects new firms need to consider if they plan to enter in the market. There is an opportunity for new companies to establish in the market, though evidence of brand loyalty to the current company and/or significant switching costs are also found, especially in the case of older people. Regarding the estimated WTP, several results should be highlighted. First, customers who have experienced more serious outages in the past tend to show a higher WTP to reduce the outage frequency. Second, highly-educated respondents, those who state a great concern for the greenhouse gases (GHG) emissions and those who carry out energy saving actions in their homes exhibit a larger WTP for renewable energies. This empirical evidence provides useful information for authorities responsible for energy policy design.
•A stated choice experiment is conducted in the Canary Islands' residential market.•Serious outages in the past lead to a higher WTP to reduce the outage frequency.•A higher education level explains a greater WTP for renewables.•People concerned for emissions and energy savers show greater WTP for renewables.•These findings provide useful information for energy policy design.