Powering the change: a Contingent Valuation study on the determinants of demand for green vs. brown energy

A Contingent Valuation study was performed to assess a potential trade-off between external costs (impacts on health caused by pollution) and the cost of electricity paid by households. Two technologies were selected for the valuation exercise: coal-fired thermal and solar photovoltaic. Our results show that households are interested in buying solar energy, and are willing to pay an additional premium for it, which would support maintenance of a feed-in tariff system. In addition, it is found that higher awareness of the external benefits and costs related, respectively, to solar and coal energy, is a crucial factor that shapes their demand in the household sector. According to the results of our study, we can expect that if electric utilities were required by regulators to provide detailed information on the external effects (and in particular, on health impacts) of coal and other fossil fuels used in their energy mix, there will be a sizeable positive shift in the demand of green electric energy in the household sector.