Preference heterogeneity for renewable energy technology

This study explores heterogeneity in individual willingness to pay (WTP) for a public good using several different variants of the multinomial logit (MNL) model for stated choice data. These include a simple MNL model with interaction terms between respondent characteristics and attribute levels, a latent class model, a random parameter (mixed) logit model, and a hybrid random parameter-latent class model. The public good valued was an increase in renewable electricity generation. The models consistently show that preferences over renewable technologies are heterogeneous among respondents, but that the degree of heterogeneity differs for different renewable technologies. Specifically, preferences over solar power appear to be more heterogeneous across respondents than preferences for other renewable technologies. Comparing across models, the random parameter logit model and the hybrid random parameter-latent class model fit the choice data best and did the best job capturing preference heterogeneity.     

Price volatility and residential electricity decisions: Experimental evidence on the convergence of energy generating source

The recent trend in most developed countries has been toward greater reliance on renewable or “green” energy sources. This paper investigates how price volatility in residential electricity rates impacts consumers' preferences for green power. Using a choice-based experiment, we present respondents with choice scenarios that feature two electric utility plans: (i) a conventional plan where electricity is generated from either coal or natural gas, and (ii) a green plan where electricity is generated renewably from either wind or solar. We then systematically vary the monthly price volatility of each plan across choice scenarios. Our results suggest that price volatility in monthly rates significantly impacts respondents' plan choices and, specifically, their decision to adopt the green power plan. In particular, increased volatility in the green power plan reduces the likelihood of respondents choosing the green plan, while increased volatility in the conventional plan increases the likelihood of respondents choosing the green plan. Moreover, the documented effects of price volatility are robust across different price premiums for the green power plan.     

Read the label! Energy Star appliance label awareness and uptake among U.S. consumers

The Energy Star label program to promote the diffusion of energy efficient home appliances is arguably the most significant government effort to reduce U.S. residential energy consumption. Program effectiveness requires that consumers are aware of the labeling scheme and also change their purchase decisions based on label information. This paper examines the factors associated with consumer awareness of the Energy Star label of recently purchased ‘white’ major appliances and the factors associated with the choice of Energy Star labeled appliances. The paper finds that household characteristics have a much stronger association with consumer awareness of labels than with the choice of Energy Star appliances. Renting the home, Hispanic ethnicity, being poor or near poor, and living in regions with lower ACEEE scores do, however, decrease the propensity for households to purchase Energy Star appliances. Eliminating these gaps in Energy Star appliance adoption would result in house electricity cost savings of $164 million per year and associated carbon emission reductions of about 1.1 million metric tons per year.     

Decarbonization of the U.S. electricity sector: Are state energy policy portfolios the solution?

State governments have taken the lead on U.S. energy and climate policy. It is not yet clear, however, whether state energy policy portfolios can generate results in a similar magnitude or manner to their presumed carbon mitigation potential. This article seeks to address this lack of policy evidence and contribute empirical insights on the carbon mitigation effects of state energy portfolios within the U.S. electricity sector. Using a dynamic, long-term electricity dispatch model with U.S. power plant, utility, and transmission and distribution data between 2010 and 2030, this analysis builds a series of state-level policy portfolio scenarios and performs a comparative scenario analysis. Results reveal that state policy portfolios have modest to minimal carbon mitigation effects in the long run if surrounding states do not adopt similar portfolios as well. The difference in decarbonization potential between isolated state policies and larger, more coordinated policy efforts is due in large part to carbon leakage, which is the export of carbon intensive fossil fuel-based electricity across state lines. Results also confirm that a carbon price of $50/metric ton CO₂e can generate substantial carbon savings. Although both policy options – an energy policy portfolio or a carbon price – are effective at reducing carbon emissions in the present analysis, neither is as effective alone as when the two strategies are combined.     

Exploring the drivers' side of the “blend wall”: U.S. consumer preferences for ethanol blend fuels

Analysis of stated preferences from over 2300 U.S. respondents shows that general attitudes nationwide favor the use of ethanol as a motor fuel but a sizeable segment (~ 20%) indicated strong unwillingness to buy ethanol blend fuels. Results from a discrete choice experiment analyzed using mixed logit regressions show that, all else constant, price-per-gallon and miles-per-gallon dominated preferences for fuel attributes but ethanol content made the average consumer more likely to choose a blend fuel. Findings provide strong evidence of heterogeneity in preferences driven by attitudes but also affected by age and income. At a point of price per mile equivalence for ethanol and gasoline, in a market where gasoline, E20 and E85 were available with no regulatory, supply or technological constraints, E85 would dominate market share. In this case ethanol would account for 56% of volume of motor fuels consumed. Our results show a high level of consumer substitutability of gasoline with ethanol and willingness to choose high ethanol blend fuels – which could help expand ethanol use beyond the current regulatory and technological limits of the blend wall.     

Carbon abatement potential of solar home systems in India and their cost reduction due to carbon finance

About 78 million rural households in India reportedly lack access to grid electricity. About 67 million of them use kerosene for lighting. Government of India is promoting the use of solar home systems (SHS) as one of the options for meeting lighting requirements in households in remote and less inhabited villages. About 363,399 SHS were reportedly disseminated across the country by December 2007. Apart from meeting the basic lighting need of the households, SHS also help in abating the emissions of green house gases (GHGs) by directly displacing the use of kerosene in households that currently use it for lighting. This study has attempted at estimating the CO₂ mitigation potential of SHS in India by studying the potential for their diffusion and the appropriate baseline. Subsequently, the scope for cost reduction to the user due to carbon finance, if received, is also studied. It is found that carbon finance could reduce the effective burden of SHS to the user by 19% if carbon prices were $10/tCO₂² and no transaction costs were involved in getting the carbon revenues. These benefits are also estimated for scenarios where transaction costs are incurred by the project proponent in getting the carbon benefits.     

The value of continuous power supply for Flemish households

This paper estimates the willingness to pay/accept (WTP/WTA) of Flemish households for continuous power supply, based on a stated preference approach. The data were collected via a choice experiment and were then used to estimate a main effects conditional logit model and a random parameter logit model with interaction effects and correlated preferences. Power outages are characterized by 6 attributes: annual frequency, duration, peak or off peak, announced or unannounced, winter or summer and invoice impact. All estimates have the expected sign. The results are used to assess the marginal WTP/WTA for each of these attributes. Overall, the outcome suggests that Flemish households have heterogeneous preferences regarding power outage attributes, and that, due to a status quo bias, only a relatively small share of them is willing to switch to a lower reliability level if this would be compensated by a bill discount.     

Response of residential electricity demand to price: The effect of measurement error

In this paper we present an empirical analysis of the residential demand for electricity using annual aggregate data at the state level for 48 US states from 1995 to 2007. Earlier literature has examined residential energy consumption at the state level using annual or monthly data, focusing on the variation in price elasticities of demand across states or regions, but has failed to recognize or address two major issues. The first is that, when fitting dynamic panel models, the lagged consumption term in the right-hand side of the demand equation is endogenous. This has resulted in potentially inconsistent estimates of the long-run price elasticity of demand. The second is that energy price is likely mismeasured.To address these issues, we estimate a dynamic partial adjustment model using the Kiviet corrected Least Square Dummy Variables (LSDV) (1995) and the Blundell–Bond (1998) estimators. We find that the long-term elasticities produced by the Blundell–Bond system GMM methods are largest, and that from the bias-corrected LSDV are greater than that from the conventional LSDV. From an energy policy point of view, the results obtained using the Blundell–Bond estimator where we instrument for price imply that a carbon tax or other price-based policy may be effective in discouraging residential electricity consumption and hence curbing greenhouse gas emissions in an electricity system mainly based on coal and gas power plants.     

Economic accounting and high-tech strategy for sustainable production: A case study of methanol production from CO2 hydrogenation

The global proposal of ‘carbon neutrality’ puts forward higher innovation demand for the cleaner energy production. The potential for employing “green” methanol produced from hydrogen obtained by water electrolysis and collected CO₂ from a gas-fired power station is examined in this study.The consumption of electricity for renewable methanol production is 1.045 times as much as that for traditional methanol production, the traditional method consumes 2.5 times as much thermal energy as the renewable methanol process. In addition, the total direct and indirect CO₂ emissions from renewable methanol production are almost one-third of the emissions from the traditional method. The total cost of setting up the units of a renewable and a traditional methanol production plant with an annual capacity of 100,000 tons is $50.1 million and $46.806 million in this study case, respectively. If the methanol price hits $310 per ton, renewable methanol production will be highly economically viable. But if electricity and gas prices rise or CO2 emission tax is imposed, renewable and conventional methanol production plants will lose their economic feasibility. Therefore, in order to deal with this risk, the establishment of special high-tech parks is of great significance to reduce costs and stabilize the sustainable development of relevant industries.     

Lower electricity prices and greenhouse gas emissions due to rooftop solar: empirical results for Massachusetts

Monthly and hourly correlations among photovoltaic (PV) capacity utilization, electricity prices, electricity consumption, and the thermal efficiency of power plants in Massachusetts reduce electricity prices and carbon emissions beyond average calculations. PV utilization rates are highest when the thermal efficiencies of natural gas fired power plants are lowest, which reduces emissions of CO₂ and CH₄ by 0.3% relative to the annual average emission rate. There is a positive correlation between PV utilization rates and electricity prices, which raises the implied price of PV electricity by up to 10% relative to the annual average price, such that the average MWh reduces electricity prices by $0.26–$1.86 per MWh. These price reductions save Massachusetts rate-payers $184 million between 2010 and 2012. The current and net present values of these savings are greater than the cost of solar renewable energy credits which is the policy instrument that is used to accelerate the installation of PV capacity. Together, these results suggest that rooftop PV is an economically viable source of power in Massachusetts even though it has not reached socket parity.     

Transitioning electricity systems: The environmental benefits and economic cost of repurposing surplus electricity in non-conventional end users

A power grid with a lower global warming impact has the potential to extend its benefits to energy systems that conventionally do not utilize electricity as their primary energy source. This study presents the case of Ontario where the role of complementing policies in transitioning electricity systems is assessed. The policy cost to incentivize surplus low emission electricity via an established mechanism for the transportation sector has been estimated (Electric and Hydrogen Vehicle Incentive Program). It is estimated that the 9056 (4760 battery and 4296 plug-in hybrid) electric vehicles that qualified for incentives from the provincial government at the end of 2016 vehicles cost $732.5-$883.9 to reduce a tonne of CO_2,e emissions over an eight year lifetime. This is then compared with the potential cost incurred by two power to gas energy hubs that utilize clean surplus electricity from the province to offset emissions within the natural gas sector. The use of hydrogen-enriched natural gas and synthetic natural gas (SNG) offsets emissions at $87.8 and $228.7 per tonne of CO_2,e in the natural gas sector. This analysis highlights the potential future costs for incentivizing new clean technologies such as electric vehicles and power to gas energy hubs in jurisdictions with a transitioning electricity system.     

Residential consumption of gas and electricity in the U.S.: The role of prices and income

We study the residential demand for electricity and gas, working with nationwide household-level data that cover recent years, namely 1997–2007. Our dataset is a mixed panel/multi-year cross-sections of dwellings/households in the 50 largest metropolitan areas in the United States as of 2008. We estimate static and dynamic models of electricity and gas demand. We find strong household response to energy prices, both in the short and long term. From the static models, we get estimates of the own price elasticity of electricity demand in the − 0.860 to − 0.667 range, while the own price elasticity of gas demand is − 0.693 to − 0.566. These results are robust to a variety of checks. Contrary to earlier literature (Metcalf and Hassett, 1999; Reiss and White, 2005), we find no evidence of significantly different elasticities across households with electric and gas heat. The price elasticity of electricity demand declines with income, but the magnitude of this effect is small. These results are in sharp contrast to much of the literature on residential energy consumption in the United States, and with the figures used in current government agency practice. Our results suggest that there might be greater potential for policies which affect energy price than may have been previously appreciated.     

Electricity demand elasticities and temperature: Evidence from panel smooth transition regression with instrumental variable approach

This study applies a non-linear model, i.e. the recently developed panel smooth transition regression (PSTR) model, and takes into account the potential endogeneity biases to investigate the demand function of electricity for 24 OECD countries from the period 1978–2004. Our empirical results demonstrate that there is a strongly non-linear link among electricity consumption, real income, electricity price, and temperature, a result that is new to the literature. As real income rises, electricity consumption rapidly increases first, and after the level of real income exceeds approximately US$2500, its increasing rate turns slow down. An increase in electricity price has a negative or no influence on electricity consumption. Evidence of a U-shaped relationship between electricity consumption and temperature is supported, and the threshold value of temperature is approximately 53 °F, which is endogenously determined. Furthermore, the estimated elasticities of time dynamic indicate that electricity demand is income inelastic, price inelastic, and temperature inelastic. As time goes on, the absolute elasticities of electricity demand gradually decrease with respect to real GDP and electricity price, whereas they gradually increase with respect to temperature, suggesting that the impact of temperature on electricity demand is becoming more important in recent years.     

Consumers' willingness to pay for renewable and nuclear energy: A comparative analysis between the US and Japan

This paper examines consumers' willingness to pay for nuclear and renewable electricity as two alternatives to fossil fuels for the reduction of greenhouse gas emissions. We conduct a choice experiment of consumer-stated preferences on the basis of an online survey in four US states and Japan after the Fukushima nuclear plant accident. First, the results suggest that US consumers' willingness to pay for a 1% decrease in greenhouse gas emissions is $0.31 per month, which is similar to the results for the US a decade ago. Japanese consumers show a slightly lower willingness to pay of $0.26 per month. Second, the average consumer in both countries expresses a negative preference for increases in nuclear power in the fuel mix (to a greater extent in Japan). Third, renewable energy sources were endorsed by both US and Japanese consumers, who show a willingness to pay $0.71 and $0.31 per month for a 1% increase in the use of renewable source energy. This study also examines the differences in respondents' characteristics. Approximately 60% of the US respondents who did not change their perception concerning the use of nuclear energy subsequent to the Fukushima nuclear crisis have almost no preference for variation in nuclear power, which is in stark contrast to the Japanese respondents' opposition to nuclear energy.     

What do customers want from improved residential electricity services? Evidence from a choice experiment

Improvements in customer satisfaction as well as product/service quality represent a common objective of all businesses, and electricity services are no exception. Using choice experiments and a mixed logit model, this study quantitatively analyzes customers' preferences and their marginal willingness to pay for improved residential electricity services. The study provides an ex ante evaluation of customers' acceptance of hypothetical electricity services. According to the results, customers consider the electricity bill and the electricity mix as the two most important attributes when choosing their electricity services. Customers are willing to pay 2.2% more in the average electricity bill (an additional monthly electricity bill of KRW 1,064; USD 0.96) for a significant increase in the share of renewable energy, which is far less than the actual cost of achieving this renewable target. Therefore, it is better to maintain the current electricity mix in principle, and the renewable share should be gradually expanded instead of making a sudden change in the electricity mix. In addition, customers are willing to pay KRW 6,793 (USD 6.15) more to reduce blackouts once in a year and KRW 64/year (USD 0.06/year) to reduce a minute of each blackout.     

The feasibility of renewable energies at an off-grid community in Canada

Three renewable energy technologies (RETs) were analyzed for their feasibility for a small off-grid research facility dependent on diesel for power and propane for heat. Presently, the electrical load for this facility is 115 kW but a demand side management (DSM) energy audit revealed that 15–20% reduction was possible. Downsizing RETs and diesel engines by 15 kW to 100 kW reduces capital costs by $27 000 for biomass, $49 500 for wind and $136 500 for solar.The RET Screen International 4.0^® model compared the economical and environmental costs of generating 100 kW of electricity for three RETs compared to the current diesel engine (0 cost) and a replacement ($160/kW) diesel equipment. At all costs from $0.80 to $2.00/l, biomass combined heat and power (CHP) was the most competitive. At $0.80 per liter, biomass’ payback period was 4.1 years with a capital cost of $1800/kW compared to wind's 6.1 years due to its higher initial cost of $3300/kW and solar's 13.5 years due to its high initial cost of $9100/kW. A biomass system would reduce annual energy costs by $63 729 per year, and mitigate GHG emissions by over 98% to 10 t CO₂ from 507 t CO₂. Diesel price increases to $1.20 or $2.00/l will decrease the payback period in years dramatically to 1.8 and 0.9 for CHP, 3.6 and 1.8 for wind, and 6.7 and 3.2 years for solar, respectively.     

The impact of the European Union emission trading scheme on the electricity-generation sector

In order to comply with their commitments under the Kyoto Protocol, France and Germany participate in the European Union Emission Trading Scheme (EU ETS) which predominantly concerns the electricity-generation sectors. In this paper we ask whether the EU ETS provides the appropriate economic incentives to produce an efficient system in line with the Kyoto commitments. If so, electricity producers in the countries concerned should include the price of carbon in their cost functions. After identifying different sub-periods of the EU ETS during its pilot phase (2005–2007), we model the prices of various electricity contracts in France and Germany and look at the volatility of electricity prices around their fundamentals while evaluating the correlation between electricity prices in the two countries. We find that electricity producers in both countries were constrained to include the carbon price in their cost functions during the first two years of the EU ETS. Over this period, German electricity producers were more constrained than their French counterparts, and the inclusion of the carbon price in the electricity-generation cost function was much more stable in Germany than in France. We also find evidence of fuel switching in electricity generation in Germany after the collapse of the carbon market. Furthermore, the European market for emission allowances has greatly contributed to the partial alignment of the wholesale price of electricity in France to that in Germany.     

Investigation of green hydrogen production and development of waste heat recovery system in biogas power plant for sustainable energy applications

In this study, biogas power production and green hydrogen potential as an energy carrier are evaluated from biomass. Integrating an Organic Rankine Cycle (ORC) to benefit from the waste exhaust gases is considered. The power obtained from the ORC is used to produce hydrogen by water electrolysis, eliminate the H₂S generated during the biogas production process and store the excess electricity. Thermodynamic and thermoeconomic analyses and optimization of the designed Combined Heat and Power (CHP) system for this purpose have been performed. The proposed study contains originality about the sustainability and efficiency of renewable energy resources. System design and analysis are performed with Engineering Equation Solver (EES) and Aspen Plus software. According to the results of thermodynamic analysis, the energy and exergy efficiency of the existing power plant is 28.69% and 25.15%. The new integrated system's energy, exergy efficiencies, and power capacity are calculated as 41.55%, 36.42%, and 5792 kW. The total hydrogen production from the system is 0.12412 kg/s. According to the results of the thermoeconomic analysis, the unit cost of the electricity produced in the existing power plant is 0.04323 $/kWh. The cost of electricity and hydrogen produced in the new proposed system is determined as 0.03922 $/kWh and 0.181 $/kg H₂, respectively.     

Realized volatility and the influence of market measures on predictability: Analysis of Nord Pool forward electricity data

This is the first paper to utilize intra-daily high-frequency data and to apply known market measures for the prediction of volatility in the Nord Pool electricity forward market. The work is based on recent methods of separating realized volatility into two components: continuous and jump volatilities. In addition, the link between future price volatility and current observable economic variables is examined. The measures—trading volume, time-to-maturity, asymmetric effect from negative shocks, and intra-week seasonality—are assessed to identify improvements in day-ahead predictions. The model where the total variation is separated into its continuous and jump components is compared with the simpler heterogeneous autoregressive model of realized variation both in- and out-of-sample. The results show a strong degree of persistence in realized volatility, and significant impacts from the mentioned market measures when predicting Nord Pool forward price volatility. Hence, there is a clear preference for models accounting for the systematic impact of market measures to improve volatility assessment for tomorrow. Moreover, separating the total variation into continuous and jump components seems potentially useful when predicting day-ahead volatility.     

Heterogeneous preferences and the individual change to alternative electricity contracts

Based on data from a large-scale computer-based survey among more than 3700 citizens in Germany, this paper empirically disentangles the determinants of the general change of electricity contracts and the specific change from any green or non-green to current green electricity contracts within the last ten years. Our econometric analysis reveals a strong relevance of behavioral factors and individual values and norms. For example, patience (which was measured by an incentivized experiment included in the survey) has a significantly positive effect on both general switches to alternative electricity contracts and specific switches to green electricity contracts. Furthermore, trust and (less robust) social preferences (also measured by an incentivized experiment) have additional significantly positive effects on the specific change to green electricity contracts. Our estimation results also imply an important role of political identification, i.e. an ecological policy orientation is strongly significantly positively correlated with the change to green electricity contracts. Furthermore, several household specific factors like relocation decisions as well as socio-demographic and socio-economic variables like household income are also relevant. The empirical analysis thus provides new explanation patterns for the phenomenon that relatively few households regularly change their electricity contracts and specifically switch to green electricity contracts, although they have high stated preferences for such changes. Our insights suggest several directions for policy and electricity suppliers to increase these switching rates. For example, the high importance of trust for the change to green electricity contracts suggests transparency initiatives of electricity suppliers to decrease concerns against renewable energies.