The results reported here hinge on the three sets of main elements of the decision model presented in the theoretical framework (Theoretical framework of investment decisions) and answer the following questions: (i) do consumers focus only on differences in energy intensity when purchasing energy durable goods or are there other attributes likely to be more highly rated than energy? (ii) How do consumers weight energy savings? (iii) What are the unobserved costs and benefits of energy-efficient goods?
The importance of energy intensity and other attributes
EE is rated differently in the three sectors and is not generally the biggest driving factor. For household buying refrigerators, there were different opinions regarding the role of attributes such as dimensions, capacity and price in the actual decision-making process. Some participants attributed more weight to dimensions and capacity (which it was agreed to treat jointly), whereas others put more on price. In the end, a consensus was reached to rank both in joint first place with the same weighting. Another consensus had to be reached between brand and energy consumption.Footnote 10 It was finally agreed to rank the energy consumption attribute in second place. Third place went to a generic category jointly representing performance, safety and aesthetics.Footnote 11 And, fourth place went to brand. The same exercise was carried out for washing machines with similar results, though in this case, participants attached more importance to load capacity than to price, followed by performance,Footnote 12 dimensions and brand in that order.
When accommodation owners were asked about the factors that influenced their purchasing decisions with respect to new appliances, the attribute most frequently mentioned was price, followed by a brand in terms of value for money, durability and customers’ perceptions. Capacity and noise level (decibels) were also mentioned, particularly for mini-bars in hotel rooms. Other attributes such as shape and size, aesthetics (shape, colour, etc.) and the performance of appliances (particularly TVs) were also mentioned. EE was found to be less important and was mentioned spontaneously by just three of the eight interviewees in relation to kitchen appliances, mini-bars and hair dryers.For HVAC, constraining factors such as budget and the infrastructure of hotels were mentioned, given that once hotels initially install HVAC, it is very costly and difficult to renew and adapt the system to the infrastructure of the hotel. Brand was the most important factor, related mainly to durability (resistance) and technical and maintenance support and then came other characteristics such as size and energy consumption.
The decision to purchase vehicles for car fleets in the private service sector was seen as a two-stage process: first, certain initial requirements were identified (for instance capacity, volume, number of seats, etc.) as necessary for the intended purposes of vehicles; then, a set of final attributes drove the decision. These final attributes seemed to be driven by an intertemporal arbitrage of cost minimisation, communication, safety and comfort attributes. Communication and safety-related attributes included communication between the driver, the company and the customers. Connectivity to a global positioning system and Bluetooth cell phone was mentioned as helping to reduce transport/delivery times and deal with customers while maintaining safety and security standards. These attributes and air-conditioning were also associated with comfort.
The intertemporal arbitrage of cost minimisation in this case consisted of balancing the future running costs implied by energy consumption (and maintenance) against the purchasing price. The price of vehicles and their energy consumption are the attributes that the interviewees immediately referred to. Vehicle brand seemed to attract less interest: the person responsible for purchasing cars usually compares several brands and chooses those that best balance these attributes. Companies also give importance to the robustness of vehicles so as to reduce the likelihood of unexpected maintenance expenses and reduce future running costs.
EE seems not to be the first attribute in the purchasing decision in any of the three sectors analysed. In the best case, it ranks second (refrigerators) and in the worst, it is not mentioned at all (most accommodation establishments in regard to the purchase of appliances).
Consumer weighting of energy savings
Lack of information is an important factor that leads consumers not to purchase energy-efficient goods (Allcott and Greenstone 2012). This factor can be seen in different forms in all three sectors (see Table 1). First, in all sectors, participants mentioned that they were unable to calculate the savings or that it would take them too long to do so. Private companies were able to calculate the savings to compare conventional fuel vehicles but were unable to estimate the energy costs of electric/hybrid vehicles. The lack of experience with hybrid/electric cars limits their ability to determine whether investing in such vehicles would result in net gains or net losses compared to fossil fuel vehicles.
A principal-agent problem limits the perception of the benefits obtained from energy-efficient goods, particularly in the accommodation sector and in the private sector for companies with car fleets. Customers of accommodation establishments are not willing to pay more for an energy-efficient service as they cannot observe the level of efficiency, particularly regarding HVAC. Owners are thus not willing to buy such goods since the payback period on the investment may be longer if the price of the room does not increase. Fleet vehicles are owned by a company and operated by employees who do not pay the costs of ownership and use (maintenance and fuel). The company (the principal) wishes to minimise those costs but the employee (the agent) has no incentive to conserve fuel. Users and buyers differ in their incentives, so a usage problem results (Graus and Worrell 2008) and the company is unlikely to buy a more expensive but energy-efficient vehicle. To deal with this principal-agent issue, companies monitor consumption by assessing consumption individually per kilometre. However, none of the companies contacted kept strict controls. Rather, they only checked in detail when excessive expenditure was detected: “I control things more or less. I check where they have been during the month, what they should have consumed and what they actually consumed, and if the figures are normal and logical that’s the end of the matter. However, if it [consumption] has risen sharply I ask them what happened”, said one interviewee from a private company. Accommodation establishments face a similar end-user problem. They seek to control energy consumption in different ways: by turning off radiators in empty rooms, informing customers face-to-face or by posters, using automatic card systems in rooms and installing remote controls.
Several sources of uncertainty are also observed which tend to mark down the importance of EE in the purchasing decision. In all three sectors, participants said that they mistrusted the information on consumption given on the label and suspected that actual consumption was higher. Households expressed a similar opinion regarding the useful lifetimes of appliances. They felt that the actual useful lifetime was likely to be shorter than the official one. They were thus reluctant to buy more expensive appliances that could last less than indicated.
Uncertainty as to future electricity price stability is another factor that affects the perceived profitability of an investment and potentially the purchasing decision: to quote one respondent, “I think there would be more gain [referring to investment in an electric or hybrid vehicleFootnote 13], right? Though it’s probably just like for everything else: they’ll probably raise the price of electricity afterwards. There has to be a catch somewhere”. Similar reasoning emerged in other sectors. Consumers believed that future increases in the price of electricity, particularly for users who switched energy source, would mark down their budget equilibrium as they already had to support the initial investment in EE. Surprisingly, they associate the regulation of the energy market with the market for energy durable goods and do not realise that if the price of energy increases running costs will be lower with more energy-efficient goods. A bidding budget constraint may support this reasoning, particularly for those consumers that cannot bear both an (observed or anticipated) increase in energy price and a higher initial price of the good. Consumers with a bidding budget constraint and who anticipate higher energy price prefer to allocate their budget to the running cost than to the initial investment cost.
Unobserved costs and benefits of energy-efficient purchases
Participants from all three sectors had a vague understanding of the concept of EE. They connected it with ideas such as energy production, the reduction of energy consumption and the existence of a label (in the case of households). Even in the case of car fleets, companies were concerned about the fuel consumption of cars but did not relate this to the concept of EE. In spite of this fuzzy understanding, all were aware that the reduction in energy consumption from energy-efficient goods came at the expense of a higher purchasing price.
All the participants from the different sectors referred to a number of hard-to-measure associated benefits or costs that would also influence their purchasing decision (see Table 2). All agreed that purchasing energy-efficient goods would benefit the environment and help mitigate climate change. In private service companies, lower demand for fuel, gas and electricity would reduce the environmental impact from resource extraction and energy production. However, environmental awareness was mentioned by only two of the eight companies: “I’m concerned [about environmental protection] and I think in that sense the fundamental limitation is the choice of fuel”. For others, “this [CO2 emissions] is a detail that we have never worried about”. Additionally, households and accommodation owners were found to be aware that the associated reduction in pollution would benefit public health.
Contributing to the green economy was also mentioned by households and accommodation owners as a co-benefit of the purchase of energy-efficient goods. Their purchase was thus seen as contributing to the creation of new jobs and to research and development.
For interviewees whose work entailed direct contact with customers, such as accommodation establishments and private service companies, energy-efficient cars or appliances were seen as helping to green their image, convey the message that they were a company with environmental concerns and were technologically up-to-date; they were also seen as enhancing their reputation in the sector.
In addition to the observed higher cost of purchase, participants referred to other, less tangible costs that nonetheless affected their final decisions. These were cited mostly by accommodation owners and private companies with car fleets. The maintenance cost of more energy-efficient appliances was perceived to be higher due to the use of new technologies whose repair and maintenance were perceived as more expensive, particularly in HVAC. Given the limited range and long charging times of electric cars, concern was expressed that purchasing them would generate costs in the form of lost market opportunities and delays in delivering merchandise that would hurt the reputation of the company. The limited number of charging points would also require a reorganisation of car parking areas during non-office hours. Employees would have to leave the cars they use in the company car park to recharge them. This would result in additional commuting time which could reduce both the productivity and well-being of workers. The limited supply of electric vehicles was another limiting factors for companies; few models per brand are equipped with electric engines and fewer match their needs. Meanwhile, they have to use conventional vehicles with higher energy-related running costs.