Household heterogeneity in valuation of heating energy costs

Abstract

This paper studies consumer heterogeneity in the valuation of lifetime heating energy costs. The valuation is expressed as the willingness to pay higher upfront costs to obtain savings over the lifetime of the heating system. The analysis relies on administrative register data on new residential houses built by private persons in Finland during 2010-2011. The data allow estimating the WTP as a function of several observable household characteristics. The median WTP in the estimation sample is e8, with a range of e2 to e15. Households with higher income and education are estimated to have higher WTP. Other characteristics that impact the WTP are household debt, family type and size, current dwelling status and previous experience of building a house.