Risk preferences, bill increases and the future reliability of electricity networks in Australia

Abstract

With the rapid uptake in renewable energy there are emerging risks for countries that rapidly displace baseload generation with intermittent sources. Whilst these risks can be mitigated with storage technologies, the cost to do so, is ultimately passed onto households in the form of higher electricity bills. We use a discrete choice experiment to explore some of the potential trade-offs households might be willing to consider in order to experience lower bill increases including delaying electricity infrastructure investments as well as demand-side management policies. Respondents were asked to evaluate alternative electricity contracts with lower cost increases, delayed renewable and battery storage investments and the potential imposition of consumption limits. We also explore how household risk attitudes explain differences in compensation required within a mixed logit model. Our results suggest that households which are highly risk-averse may require more compensation.