Can renewable energy be financed with higher electricity prices? Evidence from a Spanish region

Abstract

In this paper we estimate the willingness to pay for mix of renewable sources of electric power by means of a discrete choice experiment survey conducted in Spain in 2010. Two main categories of power supply attributes are explored: source of renewable power (wind, solar and biomass) and the origin of such power. The findings suggest that most consumers are not willing to pay a premium for increases in the shares of renewable in their electricity mix. For two of the three renewable sources considered (wind and biomass) an increase of the renewable mix would require a discount. Instead, we record positive willing to pay for increases in the share of both solar power and locally generated power. However, preferences for types of renewable (solar and wind) are found to be heterogeneous. By classifying respondents in two groups according to the implied importance of the share of renewable sources in their power mix we identify a market segment consisting of 20% of respondents that could promote renewable energy in the absence of subsidies. This is because such a segment shows willingness to pay higher than the current feed-in tariffs.