Energy Efficiency Investments in the Home: Swiss Homeowners and Expectations about Future Energy Prices

In May 2010, we surveyed 473 Swiss homeowners about their preferences for energy efficiency renovations in their homes. We used conjoint choice experiments that asked respondents to choose among hypothetical energy efficiency renovation projects. We find that homeowners are responsive to the upfront costs of the renovation projects, the savings in energy expenses, the time horizon over which such savings would be realized, and the thermal comfort improvement afforded by such renovations. Even more important, the likelihood of undertaking energy-efficiency renovations increases with the size of the subsidy offered by the Swiss federal government. At least for an average-sized project, we find that the impact of a rebate is comparable to that of an improvement in the thermal comfort of the home. The savings in the annual energy bills and the duration of the investment are less important. The discount rate implicit in the responses to the conjoint choice experiments is low. Depending on the specification of the random utility model, the discount rate ranges from 1.5 to about 3%. This is consistent with the point in Hassett and Metcalf (1993) and Metcalf and Rosenthal (1995), and with the fact that our scenarios contain no uncertainty. Respondents who feel completely uncertain about future energy prices are more likely to select the status quo (no renovations) in any given choice task and weight the cost of the investments more heavily than those respondents who expect energy prices to increase in the future. The hypothetical renovations are more likely to take place when respondents believe that climate change considerations should be an important determinant of home renovations.