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Risk preferences and purchase of energy-efficient technologies in the residential sector

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  • Qiu, Yueming
  • Colson, Gregory
  • Grebitus, Carola

Abstract

Perceived risk in future energy cost savings of energy efficient technologies has been well identified as a major barrier to the adoption of such technologies. However, direct empirical evidence of the impact of consumer risk aversion on the adoption of energy efficient technologies has been limited. In this paper, we elicit consumer risk preferences using a multiple price list experiment tailored to household energy decisions. We then use the elicited risk preferences to explain consumers' self-reported historical purchase of energy efficient appliances and installation of energy efficiency retrofitting technologies. Using data from 432 homeowners from Arizona and California, USA, results show that more risk averse consumers are less likely to adopt energy efficient technologies (except for the case of energy efficient air-conditioners). In addition, the findings provide evidence that households' perceived mobility as measured by the probability of moving within five years, can amplify the negative impact of risk aversion on the adoption of energy efficiency retrofitting technologies. Overall, the results provide implications for policy makers and companies involved in promoting energy efficient technologies.

Suggested Citation

  • Qiu, Yueming & Colson, Gregory & Grebitus, Carola, 2014. "Risk preferences and purchase of energy-efficient technologies in the residential sector," Ecological Economics, Elsevier, vol. 107(C), pages 216-229.
    • Handle: RePEc:eee:ecolec:v:107:y:2014:i:c:p:216-229
    DOI: 10.1016/j.ecolecon.2014.09.002
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    More about this item

    Keywords

    Appliances; Energy efficiency; Home energy improvements; Retrofit; Risk preferences;
    All these keywords.

    JEL classification:

    • Q29 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Other
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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