Factors impacting energy-efficient retrofits in the residential sector: The effectiveness of the Slovenian subsidy program

Abstract

This study assesses the effectiveness of the Slovenian subsidy program introduced in 2009 on household decisions for energy-efficient building retrofits. A discrete choice regression model with individual random effects is estimated, using a retrospective panel data of 6,882 Slovenian households covering the period from 2006 to 2014. The objective of this study is to identify factors that influence the decisions of Slovenian households to undertake energy-efficient retrofits of their homes and to examine the effectiveness of the subsidy program. The results reveal decisive factors for implementing energy-efficient retrofits to be a household’s financial status, past retrofit activity, the location of homes, the building’s age and type, and electricity expenditures. Regional climate differences and economic activity (GDP p.c.) also trigger energy-efficient retrofits. During the period between 2009 and 2011, the subsidy program proved to be ineffective, implying the presence of free-riders. In contrast, evidence on the positive effect of the program on retrofit rates in the years 2012 to 2014 was found with a varying share of free-riders. In 2012, free-ridership was not detected, coinciding with a significantly increased amount of available funds, while in the following years the share of free-riders increased to 52.3% and 62.0%, respectively.