Willingness-to-pay for low-carbon residential heating systems: A discrete choice experiment among Dutch households

Abstract

Most studies on decarbonizing space and water heating focus on the potential of low-carbon heating technologies from a top-down perspective, while there has been limited research on consumer preferences for low-carbon heat. To address this gap, we conduct a discrete-choice experiment among 1797 individuals in the Netherlands to estimate the willingness-to-pay (WTP) for residential-heating systems. Our results from the latent-class logit (LCL) model indicate that, on average, Dutch households are willing to pay a premium on their current monthly energy bill of 33% for electricity and 29.4% for hydrogen relative to using gas for heat production, 15.3% for reducing the amount of CO2 emissions per kWh of heat with 100 g and 16% for having the option to switch between energy retailers. In contrast, they require a discount of 28.4% for district-heating systems relative to standalone home appliances. Additionally, the class-profiling analysis indicates that individuals with higher education and income levels in the Northern Netherlands have the highest WTP for low-carbon electricity and hydrogen. These findings suggest that policymakers should favor decentralized heating solutions over district-heating systems to facilitate an energy transition in the residential sector. If district-heating systems are implemented, combining them with electricity or hydrogen instead of natural gas is recommended to realize higher consumer welfare.