Understanding the risk perception of energy efficiency investments : Investment perspective vs. energy bill perspective

Title data

Rockstuhl, Sebastian ; Wenninger, Simon ; Wiethe, Christian ; Häckel, Björn:
Understanding the risk perception of energy efficiency investments : Investment perspective vs. energy bill perspective.
In: Energy Policy. Vol. 159 (2021) . - 112616.
ISSN 0301-4215
DOI: https://doi.org/10.1016/j.enpol.2021.112616

Project information

Abstract in another language

Energy efficiency is seen as a key element for sustainable societies necessary to avert climate change. Literature analyzing risk connected to energy efficiency finishes with two different conclusions. First, investment risk, caused by volatile future energy bill savings, is a key barrier for energy efficiency investments. Second, studies argue that energy efficiency is risk mitigating by reducing energy price exposure and therefore the volatility of future energy bills. We call these perspectives on risk connected to energy efficiency the investment perspective and the energy bill perspective. Based on Bernoulli's utility theory we formulate a mathematical model to compare both perspectives and show how the perspectives influence decision-making. We evaluate this model using a case study of the German housing retrofitting market and show how individuals invest more in energy efficiency when evaluating from the energy bill perspective. With this work, we bring together existing studies on risk connected to energy efficiency to enable effective environmental policy and show new perspectives on future energy efficiency research.