Testing for non-linear willingness to accept compensation for controlled electricity switch-offs using choice experiments

With a higher share of renewable energy in the energy production mix, the need for a flexible electricity production, storage and demand increases. At household level, flexibility in the electricity consumption has the potential to mitigate unexpected drastic shortages of electricity in the system. The efficiency of household flexibility depends on the level of compensation needed to make households accept restrictions in their electricity consumption.

The present paper contributes to a growing literature estimating the compensation requirements. Using the economic valuation methods choice experiments, we estimate the amount of compensation needed for households to accept contracts, which allow the energy company to remotely switch off the washing machine, laundry dryer and dishwasher in the household.

The contracts vary with the number of times the appliances can be switched off in a year and the duration of each switch off event. Households are willing to accept contracts that allow the energy company to turn off individual devices and charge compensation ranging between 4.8 and 99.0 €/year, depending on the type of contract.

The compensation level is found to increase exponentially with the number of annual switch-offs and a linearly with the duration of each switch-off.