Electricity Prices and Consumers' Long-Term Technology Choices: Evidence from Heating Investments

Tekijät: Anna Sahari

Julkaisu: VATT Working Papers 95

Päiväys: 27.9.2017


This paper studies consumers' sensitivity to energy costs at the moment of making a long-term energy technology investment. The analysis exploits within-region variation in local, regulated electricity distribution prices that are very persistent over time and therefore a good measure of long-term price expectations. Price impacts are estimated on extensive administrative registry data of private persons acting as home builders in Finland during 2006-2011. The results show that electricity prices notably influence builders' heating choices, and price increases that are mostly due to taxation have induced demand for technologies based on renewable energy. However, the results on the comprehensive set of observable individual-level characteristics imply that issues related to information and credit availability may hamper price sensitivity.
Keywords: Elasticity, Electricity, Discrete choice, Consumer behavior

Tutkimuksen pääteemat: Ympäristö, energia ja ilmastopolitiikka

ISBN: 978-952-274-202-5 (PDF)

JEL: D12 D83 Q41 R22