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Consumer Preferences for Solar Energy: A Choice Experiment Study

Abstract:
Electricity generation in the United States is rapidly moving towards integrating more renewables into the system due to several factors, including cost competitiveness, consumer preferences, and state and federal policies, such as production and income tax incentives, renewable portfolio standards (RPSs), and state level subsidies for solar energy. While these policies have been researched comprehensively, in this paper we investigate consumer preference and willingness to pay toward renewable energy. Consumer preferences may impact the type of renewable energy utilized, as well as state-determined RPS requirements. We implement a choice experiment survey to gain understanding of consumer preferences and their preference heterogeneity. We conduct the survey in New Mexico, a state with RPS and great potential for renewables, particularly in solar where it ranks third in the U.S. for that potential. Focusing on the consumers of the state's major utility, our choice experiment considers an increase in renewable energy and preference for different types of solar energy (rooftop solar and solar farm). We control for location heterogeneity (i.e., rural vs. urban), as well as exposure to solar installations. Utilizing multinomial logit and random parameter logit our results suggest respondents support an increased RPS solar requirement and they have a positive marginal willingness to pay (MWTP) for rooftop solar and smart meter installation. These values are impacted by several factors, including location and exposure to solar. We also observe a distance decay effect on respondents' MWTP for different solar plans. For regulators considering additional RPS levels, or utilities considering solar installations, the results provide improved information on consumer preferences, heterogeneity of response, and MWTP for solar energy.

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Keywords: Renewable Portfolio Standard; Solar Energy; Stated Preference; MWTP; Choice Experiment Survey; Spatial Heterogeneity; Distance Decay

DOI: 10.5547/01956574.41.5.jmam

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Published in Volume 41, Number 5 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.