| The United States generates its electricity using a wide variety of fuel sources, primarily oil, natural gas, nuclear, and coal. Of increasing concern are the adverse environmental impacts of these energy sources. Due to pollution externalities these traditional energy sources tend to have market prices below their true social cost. Green energy sources, in contrast, have higher market prices than traditional sources but, likely, lower social costs.; Electricity producers tend to offer only traditional energy options, in part, because one expects consumers to free ride when consumption benefits are nonexcludable. Nevertheless, there appears to be real and growing interest among many consumers for environmentally friendly energy production (Bird and Swezey, 2005). These preferences may make it privately optimal for some consumers to pay a voluntary premium.; This paper examines a specific set of green energy attributes to better estimate consumer WTP and uses a contingent choice experimental design. The analytical technique is a survey-based contingent choice experiment targeting electricity consumers in New Castle County Delaware. Data were collected to test the hypothesis that consumers distinguish between a single, generic "green energy" source---as modeled in existing literature---and four specific green fuel sources. In addition, the results are used to estimate marginal WTP for four green energy sources in two potential green energy program administration scenarios. The results show that there exists a positive WTP for green energy electricity and, the specific green energy source affects WTP. In fact, individuals did exhibit preferences for solar versus a generic green or wind source. Biomass and Farm Methane are found to be the least preferred sources.; Further, changes in welfare under the two assessed program administration scenarios---voluntary and mandatory provision---result in different values. These findings show the substantive significance of recognizing the variation in preferences for green energy sources when designing green energy electricity programs. The findings of this study should help guide electricity producers in offering more attractive green energy options and policymakers in the design of better policy incentives, helping consumers and suppliers attain a more efficient allocation of energy resources. |
