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Rebates, Loans, and Customers' Choice of Appliance Efficiency Level: Combining Stated- and Revealed-Preference Data

Residential customers' choice of efficiency level for appliances, and their participation in demand-side management (DSM) programs, are examined using data on customers' stated preferences in hypothetical (i.e., conjoint-type) situations and their revealed preferences in real-world choices. The analysis provides information on customers' willingness to pay for energy savings, the importance of rebates in customers' decisions, and customers' response to DSM programs that offer loans for purchases of high-efficiency appliances. An estimated model is used to forecast the decisions of customers under: higher rebates, replacement of rebates with finance programs, offering of loans and rebates as alternative options for customers, and the elimination of DSM programs. We find that attractive loans (e.g., low interest rates, long repayment periods) are necessary to have the same effect as rebates. Programs that offer customers the option of loans or rebates are found to be far more effective than programs that offer only loans or only rebates.

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Energy Specializations: Energy Efficiency

JEL Codes:
Q55 - Environmental Economics: Technological Innovation

Keywords: Appliance effeciency, DSM, rebates, revealed preferences, residential customers

DOI: 10.5547/ISSN0195-6574-EJ-Vol16-No1-4

Published in Volume16, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.