Fuel mix disclosure in Germany—The effect of more transparent information on consumer preferences for renewable energy

Abstract

Electricity suppliers in many countries are legally required to disclose their electricity products' fuel mix, with the objective of helping consumers make more informed electricity purchase decisions. The fuel mix disclosure system in Germany differs from those of many other countries and from that which the European Union demands. While electricity suppliers must list fossil and fissile energy sources individually, the renewable energy sources (RES) are lumped together under the generic terms “renewable energies supported by the EEG” and “other renewable energies.” We investigated whether breaking these generic terms down into their components (photovoltaics, hydropower, wind power, and biomass) impacts consumers' preferences and their willingness to pay for renewables. Our results suggest that consumers are willing to pay more for electricity made from RES when information about the individual RES was provided. We found that a possible explanation for this finding is that consumers perceive the specified RES as less harmful to the environment than the two generic RES and that consumers have poor knowledge about what energy sources these generic RES represent. We therefore recommend German policy makers to move away from the current fuel mix disclosure system toward one that provides more detailed information.