If one goes up, another must come down: A latent class hybrid choice modelling approach for understanding electricity mix preferences among renewables and non-renewables

Abstract

Many countries, states, and territories have set short and long term targets to increase the share of renewable sources for electricity generation as part of their respective energy policies. Increased reliance on renewables can occur from several sources (e.g., biomass, solar, hydro, wind). Similarly, when increasing renewables, a decreased reliance on one or more non-renewable (e.g., coal, gas, oil, nuclear) sources must occur. However, each region is different with respect to its present profile and capabilities to generate electricity. Complicating this is that demand can differ across individuals, states and territories. By using a discrete choice experiment and latent class hybrid choice model (LCHCM), we estimate individual willingness to pay (WTP) values among four renewable and four non-renewable energy sources for residents across Australia’s states and territories. The model identifies two latent segments in relation to WTP, which can be described using differences in pro-environmental attitudes and socio-demographics. The findings reveal that preferences in terms of energy mix composition for electricity generation are heterogeneous across Australia states and individuals. WTP is found to be higher for biomass, whilst those who are younger, males and those holding pro-environmental attitudes are also supportive of hydro and solar over gas and nuclear sources.