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Consumers’ Willingness to Pay for Renewable Electricity in Italy: A Comparative Analysis

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The Economic Valuation of Green Electricity

Part of the book series: SpringerBriefs in Environmental Science ((BRIEFSENVIRONMENTAL))

Abstract

European Union (EU) directive 2009/72/CE imposes environmental and energy targets on European countries. The goal of Italy is to attain 26.4% renewable electricity (RE) production from renewable energy sources (REnS) by 2020. This goal imposes an extra cost on households; consequently, it is important to estimate their willingness to pay (WTP) to attain this target. Our research is based on a nationwide survey of households conducted in November 2007 in Italy, explicitly considering uncertainty and the compulsory burden on the electricity bill. The results obtained with different models indicate that there is noticeable WTP among Italian households for the RE goal and that the estimated WTP differs according to uncertainty. Indeed, the median WTP is between EUR 4.62 and EUR 8.05 every two months per household. In this chapter, the relevance of these findings today is discussed.

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Notes

  1. 1.

    A scenario in the World Energy Outlook (IEA 2014) takes account of broad policy commitments and plans that have been announced by countries, including national pledges to reduce greenhouse gas emissions and plans to phase out fossil energy subsidies, although the measures to implement these commitments are yet to be identified or announced.

  2. 2.

    The literature point out that the definition of RE is controversial because it is a new concept for consumers who need more information to buy green electricity (see Salmela and Varho (2006) and Diaz-Rainey and Ashton (2008)). According to these researchers, the green energy market is poorly defined and this implies consumer confusion. Finally, Litvine and Wüstenhagen (2011) focus on the perceived benefit as a key factor to increase the purchasing of green electricity. These characteristics reduce the related consumers’ WTP. Consequently, we conduct focus group analyses using people who are well informed about the characteristics of green electricity, to avoid consumer confusion due to lack of information.

  3. 3.

    This method is similar to the MBDC proposed by Welsh and Bishop (1993), which allows us to consider that consumers have a range of economic values or a valuation distribution in mind, instead of single-point economic value estimation. SPC was introduced by Wang and Whittington (2005); more recently, Fonta et al. (2010) and Ichoku et al. (2009) have used the same approach. Differences between these two approaches are also illustrated by Wang and He (2011).

  4. 4.

    Ex ante and ex post approaches to reduce hypothetical bias are reviewed by Loomis (2011).

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  1. Università di Perugia, Perugia, Italy

    Simona Bigerna & Paolo Polinori

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  1. Simona Bigerna
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Bigerna, S., Polinori, P. (2019). Consumers’ Willingness to Pay for Renewable Electricity in Italy: A Comparative Analysis. In: The Economic Valuation of Green Electricity. SpringerBriefs in Environmental Science. Springer, Dordrecht. https://doi.org/10.1007/978-94-024-1574-2_3

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