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7/30/2019 Enacting a market: how consumers relate to a free market for electricity
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Enacting a market
Understanding the electricityconsumption of households
Henrik Karlstrm, Norwegian University of Science and
Technology
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Introduction
When energy conservation is a concern, how to proceed toachieve it?
Presently, two strategies are being pursuedo Using the marketo The environmental route
How has the switch to a free market for electricity and
increased focus on environmental issues affected energyconsumption in Norway?
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Market efficiency
Standard economic theory dictates that rational consumerslimit their energy consumption in line with price fluctuations
A system with low or non-existing transfer costs and ascomplete price information as possible is preferable
The question then becomes whether consumers act
accordingly
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Environmental morals
Environmental issues are prevalent in the public discourse
In terms of energy savings, it takes on a moral note: withglobal warming, not conserving energy is morally wrong The question then becomes one of convincing consumers
and then letting them take action of their own will
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Politics receding
Both strategies rely on individual responsibility forandinterest inreducing consumption
This is connected to the deregulation of the electricity
marketo It was designed for politicians to step away from the
workings of the energy markets What happens when individual actions are not in line with
expectations?
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But how efficient?
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Energy in Norway
Norway is in many ways unique:o One of the world's oldest completely deregulated
electricity market (since 1990)o Electricity production is almost completely hydro power:
cheap and renewable Production side is a free market, distribution is a natural
monopoly This year, historically cold winter and, with that, historically
high electricity priceso Renewed debate about constructing gas plants
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Data material
Based on a representative survey of 1500 respondents Asked about attitudes towards and behaviour regarding the
electricity market and energy conservation
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Market behaviour
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Market behaviour
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Other market findings
The regions with the highest prices are least active users ofthe market
Low income households likewise One third say they are already doing all they can to reduce
consumption Conversely, one third say prices would have
to permanently increase by at least 50 % for this to happeno This is reflected in consumption patterns when prices
periodically rise drastically
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Environmental findings
70 % find the threat of anthropogenic climate changeserious
60 % say they have made lifestyle changes because of this
threato Most of this is due to perceived energy consumption
reductions (which are barely noticable in the numbers)and improved waste sorting
80 % think it is important that their energy comes fromrenewable sourceso 1/3 of these would pay more for a renewable guarantee
80 % think other people waste electricity
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Political findings
75 % think politicians don't do enough to promote renewableenergy
67 % think there should be more political control over the
price of electricityo But 40 % think the market liberalisation has led to lower
prices 70 % think there should be more political control over the
construction of more electrical power in Norway 75 % think investments in new electrical power are too low
o 80 % think power utilities have excessive profits
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Conclusion
Although some consumers act according to free marketintentions, in general people are not overly market orientedo Market learning is limited
Consumers are more driven by moral considerationso But is it "old-fashioned" thriftiness or worry over climate
change? They also want the return of politics
o Running to daddy when things turn rough? Question: What mechanism can obtain energy savings,
when economic and moral signals have limited value?