Energy-Efficiency Investments in Homes: Do Digital Environments Increase Adoption?

Abstract

In the coming decades, many countries need to improve the energy efficiency of their building stock, to realize the climate and renewable energy goals. In the Netherlands, this involves more than 5 million dwellings and many billions euros in costs. A considerable part of these costs has to be carried by home owners, and the challenge is to motivate them to timely invest in energy retrofitting. Households experience various barriers on their way to energy retrofitting of homes. Most prominent are: a high cost of gathering and verifying the information, financial constraints, risk aversion (Gerarden et al, 2017, Busse et al., 2013, Allcott and Wozny, 2014, Cattaneo, 2019). In the recent years various attempts have been made to address these barriers exploiting the possibilities of new digital communication technologies. Supported by (local) governments, new online platforms provide home owners looking for energy-efficiency investments with different services. These include: tailor-made advice on best energy-efficiency investments in specific homes; preselection of suppliers of a certain chosen technology (e.g. insulation, solar panels, high return boilers); setting up a collective purchase campaign for a neighbourhood, etc. There exists a small literature studying the effectiveness of online platforms in reducing consumer search and verification costs for products (Goldfarb and Tucker, 2019). For various domains (airlines, book stores, holiday homes) studies show that digital environments increase the share of successful matches between customers and suppliers. Still, not much is known yet to what degree this also holds for digital platforms that support purchasing of new home energy technologies. Further, little attention has been given so far to the heterogeneity of the consumers: for which groups of customers online platforms work well or for which not. Our study aims to fill these two knowledge gaps. We exploit unique data from a Dutch online platform that supports home owners in their collective purchase of various energy efficient home technologies. The data include information on some 10.000 platform participants and 300 collective purchase campaigns during the period 2013-2020. The data are merged on household level to the restricted access information about the socio-economic characteristics of the households and to their energy consumption. We study the determinants of the energy-efficiency investment choices households make on the platforms. These determinants include: the socio-economic characteristics of the households, their energy consumption pattern, the type of energy-efficient technology that is being purchased, etc. This paper has practical implications. Research shows that households differ in their energy consumption patterns and in their attitude towards energy transition (e.g. Albert and Maasoumy, 2016; Motlagh et al., 2019; Ossokina et al., 2020). It is therefore important to provide customized information to the consumers and select precise tools for specific household groups. Our study provides insights on how to do this using online environments that are being used more and more to support and stimulate energy transition in homes.