The limited potential of regional electricity marketing - Results from two discrete choice experiments in Germany

The German energy transition has led to a strong expansion of renewable energies in recent years. As a result, the German population is increasingly coming into contact with generation facilities. To increase local acceptance for new installations and to create new sales channels for energy suppliers, the legislature has established the System for Guarantees of Regional Origin in 2019, which allows the marketing of electricity from subsidized facilities as electricity generated in the region. However, regional electricity comes with additional costs on the procurement and sales side of energy suppliers, and it is unclear whether and to what extent consumers are willing to pay a premium for electricity generated regionally. This study investigates the willingness to pay (WTP) of residential customers based on two samples of 838 and 59 respondents, respectively. Our model results show that, on average, WTP for regional electricity generation is positive, especially among female, younger and better-educated customers, although differences in WTP between these sociodemographic characteristics are small. Factors that are more relevant are the current type of electricity tariff, differentiated into non-green and green, with the latter having a positive influence, but also the tariff switching behavior of the past, which is a proxy for price sensitivity. Although WTP is positive, it is severely limited, and only pertains to a subgroup of electricity customers. Hence, it is not surprising that our simulation shows that including a regional green electricity tariff in an energy supplier's portfolio is likely to lead to product cannibalization, meaning that mainly green electricity customers will choose this tariff. From an energy supplier's perspective, these results raise the question of whether offering a regional electricity tariff is economically viable. Future research could further investigate what underlying factors drive preferences for regionally generated electricity and how it can contribute to local acceptance.

Automated summary

The German energy transition has spurred the growth of renewable energies, increasing consumer contact with generation facilities. Research indicates that consumers have a positive willingness to pay for regional electricity, especially among female, younger, and better-educated customers. However, the willingness to pay is limited, potentially leading to product cannibalization among green electricity customers.