Renewable gases in the heating market: Identifying consumer preferences through a Discrete-Choice Experiment

Introduction Space heating accounts for more than a quarter of the final energy demand in the EU and is still largely based on imported fossil fuels. Natural gas remains the main energy carrier for generating heat in buildings in many European countries, e.g. Germany, Belgium or Italy. This makes the heating sector a primary target for decarbonization. However, as long-lived fossil-fuel systems are only slow to be replaced, short-term solutions are becoming important: Drop-in renewable gases like Biomethane or Synthetic Natural Gas (SNG) could play a central role in this regard. On a supranational level directives like the RED II already mandate an increased uptake of renewables in the heating sector. Furthermore, many countries have created political frameworks for voluntary renewable gas markets. However, the share of renewable gas in the European gas grid is still only marginal. Robust green demand for renewable gases could help fulfilling the targets set in the Paris Agreement. Yet existing research focuses on the supply side and technical aspects of renewable gases, leaving the demand side and consumer preferences largely neglected. Against this backdrop we raise the following research questions: (1) Which attributes of renewable gas products are how important to consumers in the heating market? (2) Which consumer groups can be identified based on their preferences for different product attributes? Methods Our study builds upon a Discrete-Choice-Experiment implemented through an online survey. We determine consumer preferences and their differences between consumer segments through part-worth utilities on a pseudo-individual level. These utilities are derived from a hierarchical Bayes estimation approach. Our study design comprised 11 choice tasks, where participants had to make a decision between four renewable gas products and one default option (=100% natural gas). The products were made up of the combination of six relevant attributes (e.g. share of renewable gas, labels, price) and their levels (e.g. 5% SNG share, two labels, 10% price increase). We calculated an individual yearly price of the default product for each participant using individual residential parameters (i.e. dwelling type, refurbishment status, living space). Data collection in June 2021 yielded 523 responses. Our study is situated in Germany, however we consider our results applicable to other national settings with an existing and developing biomethane market and a high dependency on natural gas. Results and discussion Our first (preliminary) results indicate that the share of renewables and the yearly price influence the purchasing decision comparably strongly. While labels and the biomethane feedstock are equally, but of lower general importance, the supplier type and the aspect of regionality can be considered as relatively unimportant. Zooming in, we see that especially products with lower renewable shares and lower prices are preferred. Regarding labels attached to products, quantity seems to matter: Products with more labels are clearly preferred over those with less labels. Our results can help explaining individual behavior patterns regarding renewable gases. Furthermore, they can inform political decision making in developing voluntary green markets (further) and help meeting the targets as e.g. formulated in the RED II.