Abstract
Koreans usually prefer the district heating system (DHS) to the individual heating system (IHS) because DHS can give them convenience and safety within their living environment. The Korean government thus plans to expand the DHS and requires information about the value that consumers place on the DHS over the IHS, which has not been dealt with in academic literature. This paper attempts to investigate Korean households’ willingness to pay (WTP) for DHS over IHS, for residential heat (RH). To this end, the authors apply the dichotomous choice contingent valuation to assessing additional WTP for DHS using a survey of 1000 randomly selected households living in buildings with IHS. A mixture model is applied to deal with the zero WTP responses. The WTP distribution is specified as a mixture of two distributions, one with a point mass at zero and the other with full support on the positive half of the real line. The results show that the mean additional WTP for DHS-based RH over IHS-based RH is estimated to be KRW 5775 (USD 5.4) per Gcal. This value can be interpreted as the consumer’s convenience benefits of DHS over IHS, and amounts to approximately 6.0% of the average price: KRW 96,510 (USD 90.4) per Gcal in 2013, for IHS-based RH. This information is useful for evaluating changes to the method used for supplying RH from IHS to DHS.
Highlights
In the literature, the district heating system (DHS) is considered best for the supply of heat, a vital requirement of human life, in urban areas with high population density [1]
A pre-test on the survey questionnaire with a focus group (100 people) was conducted to obtain the distribution of the willingness to pay (WTP) values. They were asked to report their additional WTP for using the DHS-based residential heat (RH) rather than the individual heating systems (IHS)-based RH
The results show that the mean additional WTP for RH use from DHS rather than IHS is calculated to be KRW 5775 (USD 5.4) per Gcal
Summary
The district heating system (DHS) is considered best for the supply of heat, a vital requirement of human life, in urban areas with high population density [1]. The DHS does not demand an individual boiler, which can significantly increase consumer convenience and safety [7]. The IHS-based residential heat (RH) consumers pay both the costs and the fuel charges. The costs required in the DHS are included in the DHS bill, and the DHS-based RH consumers pay just the RH charges. Over the period 2008–2012, for example, 16 people were killed and 110 people were wounded when individual boilers exploded. For these reasons, some 200,000 households have voluntarily changed their heating system from IHS to DHS, even though the change meant considerable cost
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