Consumers' Preferences for Green and Brown Electricity : a Choice Modelling Approach

Many countries face the choice between continued investment in fossil fuels versus extensive development of renewable energy sources like wind and small scale hydro. While fossil fuels like coal and natural gas are characterized by emissions of greenhouse gases and regional air pollutants, renewables have mainly local impacts in terms of visual intrusion and ecological effects. Thus, for the renewable energy options the location and size of the development have become the main issues. We conduct a Choice Experiment (CE) to elicit people?s preferences and willingness-to-pay (WTP) for different energy sources and their characteristics. The results show that Norwegians prefer wind power in the choice between continued imports of electricity from coalfired power plants versus building more hydro power plants, windfarms or gasfired power plants domestically. They also prefer to concentrate the development to a few large wind farms rather than many small ones. However, we also find a Not-In-My-Back-Yard (NIMBY) effect of wind farms. The observed WTP reflects the difference in external costs between these energy sources, and can be used as an input to a plan that provides an economic optimal mix of investments in different energy sources.