Assessing demand for green electricity products amongst upper-middle income Western Cape households a contingent valuation study

Master Thesis


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University of Cape Town

The study presented in this paper examines the demand for green electricity products amongst upper-middle income Western Cape households. A social cost-benefit analysis to inform electricity investment planning requires the environmental benefit of using green electricity to be expressed in monetary terms. Since existing markets trade in electricity as a homogenous good, market data is of little use in this regard, and non-market valuation approaches are required. This study seeks to answer three key questions: To what extent would upper-middle income households in the Western Cape Province be willing to purchase premium-priced green electricity products? What is the maximum amount that a typical upper-middle income Western Cape household would be willing to pay for such a green electricity product? And: What are the demographic and attitudinal characteristics of adopting households and their members? To answer these questions the contingent valuation methodology was employed, using primary data from a survey (n=464) conducted in Cape Town during April and May of 2012. This survey sought to assess WTP using a hypothetical market, and gathered data on eleven demographic and attitudinal factors selected as possible determinants of WTP on the basis of a literature review.

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