Household preferences for energy goods and services: A choice experiment application
Thesis event information
Date and time of the thesis defence
Place of the thesis defence
Linnanmaa TA105 (Arina auditorium)
Topic of the dissertation
Household preferences for energy goods and services: A choice experiment application
Doctoral candidate
M.Sc. (Master of Science) Enni Ruokamo
Faculty and unit
University of Oulu Graduate School, Oulu Business School, Department of Economics, Accounting and Finance
Subject of study
Economics
Opponent
Professor Anni Huhtala, VATT Institute for Economic Research
Custos
Professor Rauli Svento, University of Oulu
Households as part of the climate kind solutions of the energy system
This thesis includes three studies on household preferences for energy goods and services. The first study examines determinants of households’ heating system choices using a choice experiment. The choice sets include six main heating alternatives (district heating, ground heat pump, exhaust air heat pump, solid wood boiler, wood pellet boiler, and electric storage heating) that are described by five attributes (supplementary heating systems, investment costs, operating costs, comfort of use and environmental friendliness). The results imply that hybrid heating appears to be accepted among households. The results also reveal differing preferences for the main heating alternatives and show that they are affected by demographic characteristics. The studied attributes also play a significant role when heating systems are being chosen.
The second study is a methodological one that extends the analysis of the first study. The second study explores the effect of perceived choice complexity on the randomness of choices in choice experiments. The study investigates how different self-evaluated factors of choice complexity affect mean scale and scale variance. The findings suggest that perceived choice complexity has a systematic impact on the parameters of econometric models of choice. However, differences exist between alternative self-evaluated complexity-related covariates. The results indicate that individuals who report that answering the choice tasks is more difficult have less deterministic choices. Perceptions of the realism of home heating choice options also affect scale and scale variance.
The third study utilizes the choice experiment to analyze households’ willingness to participate in demand side flexibility. The study examines whether individuals are willing to time their electricity usage and heating; whether they are interested in dynamic pricing contracts such as real-time pricing, two-rate tariffs, or power-based tariffs; and how emissions reductions affect their choices. The results indicate that households’ sensitivity to restrictions in electricity usage is much stronger than their sensitivity to restrictions in heating. Households also require compensation to choose real-time pricing over fixed fees. The findings suggest that room may exist for new dynamic electricity distribution contracts, such as power-based tariffs, in the market. Other value-creating elements besides monetary compensation also exist that could incentivize households to offer demand side flexibility because households value power system level reductions in CO2 emissions.
The second study is a methodological one that extends the analysis of the first study. The second study explores the effect of perceived choice complexity on the randomness of choices in choice experiments. The study investigates how different self-evaluated factors of choice complexity affect mean scale and scale variance. The findings suggest that perceived choice complexity has a systematic impact on the parameters of econometric models of choice. However, differences exist between alternative self-evaluated complexity-related covariates. The results indicate that individuals who report that answering the choice tasks is more difficult have less deterministic choices. Perceptions of the realism of home heating choice options also affect scale and scale variance.
The third study utilizes the choice experiment to analyze households’ willingness to participate in demand side flexibility. The study examines whether individuals are willing to time their electricity usage and heating; whether they are interested in dynamic pricing contracts such as real-time pricing, two-rate tariffs, or power-based tariffs; and how emissions reductions affect their choices. The results indicate that households’ sensitivity to restrictions in electricity usage is much stronger than their sensitivity to restrictions in heating. Households also require compensation to choose real-time pricing over fixed fees. The findings suggest that room may exist for new dynamic electricity distribution contracts, such as power-based tariffs, in the market. Other value-creating elements besides monetary compensation also exist that could incentivize households to offer demand side flexibility because households value power system level reductions in CO2 emissions.
Last updated: 1.3.2023