Ruhr Economic Papers

Ruhr Economic Papers #645

Germany’s Energiewende: A Tale of Increasing Costs and Decreasing Willingness-To-Pay

by Mark Andor, Manuel Frondel and Colin Vance

RUB, RWI, 09/2016, 31 S./p., 8 Euro, ISBN 978-3-86788-750-2 DOI: 10.4419/86788750

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Abstract

This paper presents evidence that the accumulating cost of Germany’s ambitious plan to transform its system of energy provision – the so-called Energiewende – is butting up against consumers’ willingness-to-pay (WTP) for it. Following a descriptive presentation that traces the German promotion of renewable energy technologies since 2000, we draw on two stated-preference surveys conducted in 2013 and 2015 that elicit the households’ WTP for green electricity. Two models are estimated, one based on a closed-ended question framed around Germany’s target of 35% renewable energy in electricity provision by 2020, and the other on an open-ended format that captures changes in WTP over time. To deal with the bias that typifies hypothetical responses, both models distinguish respondents according to whether they express definite certainty in their reported WTP. The results from both models reveal a strong contrast between the households’ general acceptance of supporting renewable energy technologies and their own WTP for green electricity.

JEL-Classification: D12, Q21, Q41

Keywords: Certainty approach; energy policy; willingness-to-pay

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