Hypothetical Market Familiarity and the Disconnect Between Stated and Observed Values for Green Energy

Abstract

Participation rates and utility premiums for green power programs are generally less than implied by contingent valuation studies. This study compares open-ended and dichotomous-choice responses with actual participation rates of a green power program to examine the effect of hypothetical market familiarity. Traditionally, respondents are asked to value a renewable energy “block” which represents a quality improvement in a percentage of a good. When placed in a more familiar market setting, stated values are more closely aligned with premiums currently charged. Participation rates remain exaggerated indicating responses are viewed as a vote in favor of or against cleaner energy sources.

Keywords

• Contingent valuation, green energy programs, renewable energy blocks, scope effects, coal-fired power plants, single-bounded dichotomous choice