Green power already out of breath? Why do German consumers not switch to green electricity?

Academic Paper 2013 98 Pages

Business economics - Miscellaneous


Table of Contents



3.The German Electricity Market

4.Theory on Consumer Behavior in the Electricity Market

5.Motives for Non-Switching to a Green Electricity Vendor

6.Empirical Investigation in the German Federal State of Mecklenburg-West Pomerania
6.1 Sampling Method & Data Collection
6.2 Questionnaire Design & Measures
6.3 Data Analysis & Data Discussion
6. Conclusion & Assessment


List of References


1. Introduction

Environmental concerns have accompanied the human species throughout history but evolved over time (Kovarik, 2011). However, modern environmental concerns all over the world have become even more significant and broadly publicized by the media when the first heralds of climate change became visible in the course of the post-industrial era of the late twentieth century. The major cause of such shifts in human attitudes was related to “the perception that our planet is reaching extremely high saturation levels of pollution” (Finisterra do Paço/Barata Raposo, 2010: 429). Besides the preservation of plants and animals before the extinction of such species, there are numerous ways of how environmental movements are expressed, one of them being the encouragement of electricity production from renewable energies.

For more than two decades, nations all over the globe are increasingly concerned about finding alternative ways to produce electricity by natural means in order to mitigate climate change related problems. The public interest in more environmentally friendly ways of producing electricity has soared even faster since the severe nuclear power plant problems in Japan in March 2011. Incidents like these let the public realize that so far most of the world’s electricity production is not as clean as previously thought and definitely not without consequences regarding nature conservation and the human species as such.

Scientists have thus unfolded more natural means of producing electricity, drawing from other sources than finite or potentially dangerous ones. The term ‘green electricity’, also referred to as ‘green power’, summarizes the ‘new’ way of thinking and thus is a merged synonym for electricity that “is generated from renewable energy sources, commonly considered to be wind, hydro/wave, solar, biomass, or geothermal power, having no or only a small impact on the environment” (Hansla/Gamble/Juliusson/Gärling (Hansla/Gamble/Juliusson/Gärling, 2008: 768). In contrast to conventional sources for electricity production, green electricity is generated from renewable sources instead of finite or potentially dangerous fossil resources. Though producing electricity from renewable energies is not emissions-neutral either, especially political forces still insist on spurring the ‘green growth’ for many reasons. Firstly, green electricity is a good alternative to conventional electricity as it “contributes to a reduction of CO2 [carbon dioxide] emissions relative to emissions resulting from conventional energy production” (Gerpott/Mahmudova, 2010: 464). Secondly, it reduces the overall dependence on fossil fuels like oil and gas (Rommel/Meyerhoff, 2009: 76) and therefore, also reduces dependence on insecure poitical regimes oligopolizing the fossil fuel market (Christ/Bothe, 2007: 5). Furthermore, the German government has set a legislative framework leading to a compulsion to act such as the goals of the ‘Integrated Energy and Climate Program’ and the small residual terms of nuclear power plants (Rommel/Meyerhoff, 2009: 75-76).

The German population strongly supports these governmental efforts as the nation itself is highly concerned about nature conservation and is thus, in an internationally unique and hardly comparable position (Gerpott/Mahmudova, 2010: 465). However, most inhabitants do not act as they actually think. Although ninety percent of the German population does sincerely support green power (BMU, 2010 b: 38), ninety-two percent of the population does not draw electricity from green electricity suppliers (BMU, 2010 b: 11). Why do most people not put their intentions and personal beliefs into action by contributing to one of the most promising environmental protection measures: green electricity? Do they not trust green power suppliers? Are there information deficits that cause the non-switching behavior? Or are consumers simply not ambitious enough to take the extra effort of paper work for switching?

This main question about switching inertia motives is to be investigated in different steps of the Bachelor Thesis at hand. Firstly, the German electricity market is to be closely analyzed since its liberalization with special regards to the proportion of renewable energies and, in this prospect, legislative actions. Therefore, an emphasis is given to the legal support by the German government as well as corporate European measures. This general analysis of background information in Germany closes with a general analysis of the theoretical background related to the main question of why consumers do not switch. Therefore, two psychological theories that tackle the issue of environmental consumer behavior are introduced, namely the ’Theory of planned Behavior’ by Icek Ajzen and the ‘Norm-activation Theory’ by Shalom Schwartz. Thereafter, these theories are applied in the subsequent discussion part that deals with a general reasoning for why consumers do not switch to green power. Then, the German federal state Mecklenburg-West Pomerania is to exemplify the consumer switching inertia. On that account, a survey in this federal state is analyzed and should directly tackle the question of why the inhabitants in this particular region barely switch to more environmentally-sustainable power suppliers. In this context, the results of the survey are compared to academic literature’s reasonings of non-switching behavior.

Therefore, the scope shall be limited to the analysis of environmental and intrinsic settings in order to provide a general framework. An in-depth discussion of the political framework or concluding measures of companies would exceed the scope of this Thesis. Instead, the main focus deals with external and internal human influences on switching behavior, taking into account a subset of psychological frameworks as well as some related economic theory.

2. Method

The research for the relevant sources drew on conventional sources such as books and academic literature that was provided by the supervisor for inspiration. Furthermore, research drew dominantly on databases and e-journals from the Internet. After scanning some literature about the green power market it turned out that many researchers have realized a switching inertia to green power. However, most empirical findings did not profoundly examine which underlying external and internal motives made consumers hesitant except for a few by researchers such as Rommel et al. Therefore, the inertia itself that prevents consumers from switching has become the main focus of this paper. After having scanned some other empirical works, the research focused on the most closely related sources that were mentioned in the first sources such as repeatedly mentioned theoretical foundations in psychology by Ajzen and Schwartz. This very narrow and specific research was concentrated on the usage of the online library service with its various facilities to draw on online databases like for example ‘business complete’ or ‘WISO’. Besides, also a key word research on the ‘edu’-google domain was utilized and helped to seek relevant information. As most of the educational sources that could be detected via google were not free of charge, again the online databases of the library became useful and often provided a reading copy. Hence, an establishment of an overall picture about switching unwillingness was possible and lead to a profound table of contents as well as an in-depth creation of a questionnaire that took into account general attitudes towards the environment, potential reasons for non-switching behavior as well as psychological theories and socio-economic characteristics. All in all, most of the research concentrated on the usage of online services of the university library. Therefore, first academic research papers could be evaluated and provided cross-linkages to other very relevant sources as well as new ideas on how to exactly narrow the topic and find relevant key words.

3. The German Electricity Market

Since allied governmental forces have implemented liberalization in the German electricity market in 1998, significant competition-related shifts have taken place as well as changes in the composition of energy sources pushed by domestic and European legislation (Bundesverband, 2007: 6). After immediate market entry reactions of new power suppliers soon abated, the market cleared resulting in a regional division among four major power suppliers which are EnBW, Vattenfall, RWE and E.ON. including their side branches in green power and subsidiaries (Bundesverband, 2007: 6-7). Apart from the big four suppliers, there are municipal energy suppliers in almost every region as well as smaller regional suppliers specializing on certain green segments (Rommel/Meyerhoff, 2009: 76). Besides the competitive changes, the fully established free market situation led to compositional power supply changes.

Major initiators of these compositional modifications of electricity supply sources were political forces mainly on the domestic level (Häder, 2010: 11-12). The national governmental commitment to climate change mitigation has changed the composition of energy resources over time[1] by fostering the emergence of renewable energies in order to achieve the aspired greenhouse gas reduction agreed upon in Kyoto (Kemfert/Schneider, 2009: 92). While this Kyoto Protocol had set a twenty-one percent reduction of greenhouse gas emissions in 2012 compared to 1990 (Kemfert/Schneider, 2009: 92), Germany’s governance even extended its own goal up to fourty percent until 2020 (Häder, 2010: 11).

As the German electricity sector accounts with forty percent (Häder, 2010: 12) for a very high proportion of overall energy-related emissions, it uncovers a considerably high potential of emissions reduction yet to be exploited. Therefore, extensive climate-related laws were enforced on a national basis wherat the energy sector was covered by several individual programs, summarized with the overall name “integrated energy and climate program” (IEKP - Integriertes Energie- und Klimaprogramm) (Rommel/Meyerhoff, 2009: 75). Among the IEKP, the most important and wide-ranging regulation in the electricity sector is the ‘Renewable Energy Sources Act’ (EEG - Erneuerbare Energien Gesetz), whose first draft was established in 2000 (Häder, 2010: 12). The main idea of the EEG draws on the ‘principle of the common burden’ as every domestic resident is charged an additional minor price premium[2] when paying for electricity consumption irrespective of any deliberate green power supply intention of consumers (Menges/Traub, 2008: 263). The price premiums are financing governmental subsidizing efforts for green power producers in order to make green electricity production more attractive. Therefore, these subsidizing principles are based on a ‘feed-in payment scheme’ that guarantees constant feed-in payments for green power suppliers over a period of twenty years (Christ/Bothe, 2007: 4).[3] Recent studies have confirmed, that the EEG has already “created strong economic incentives for electric power companies to generate electricity from renewable sources by granting sales prices for such energy which are sufficient to cover the higher production costs” (Gerpott/Mahmudova, 2010: 464).[4] Furthermore, the EEG has significantly prevented greenhouse gas emissions by contributing fifty-five million tons less carbon dioxide equivalents in 2009 (BMU, 2010 a: 6).

Although the German government has implemented measures like the EEG to reduce carbon dioxide emissions with the help of renewable energies, it is also legally bound by European Environmental legislation. When the European Union (EU) initiated an Emission Trading Scheme (ETS), coming into effect in 2005, it aimed at reducing carbon dioxid emissions on a common European basis by applying the polluter-pays principle (Menges/Traub, 2008: 263). This goal was to be achieved with the help of handing out certificates as a mean of emission allowance per ton, directed at those causing the majority of carbon dioxide pollution. First of all, the pollution causers are electricity producers (among other industrial companies such as steel and glass factories) with a combustion heat performance of more than twenty Megawatt (MW) (Häder, 2010: 12). The EU established a market for these ETS certificates to be traded at and planned to subsequently hand out less emission certificates over time and hence, realize a reduction of CO2 emissions (Kemfert/Schneider, 2009: 93).

However, the significantly different approaches of the EU and Germany towards carbon dioxide reduction has resulted in interactions between the multi-layered legislation (Häder, 2010: 15). While Germany’s government heavily subsidises renewables, its effect of prevented emissions lead to released certificates in the EU Emissions Trade (Häder, 2010: 17-18). In effect, experts challenge the actual effectiveness of the German EEG as the overall result is that Germany’s cost-intensive natinal efforts in the course of the EEG become emission-neutral on a European basis (Häder, 2010: 12-13). Still, the discussion of the reasonability of both legislative measures shall not be further discussed here as the main focus of this paper is to find reasons why consumers do not switch. In this context, the question remains if both legislative measures do provide benefits insofar as they create an incentive for customers to switch to green power suppliers or are they solely a burden for consumers due to increased electricity prices. However, an examination of this issue is beyond the scope of this paper’s investigations.

4. Theory on Consumer Behavior in the Electricity Market

In order to understand the reasons for why consumers do not switch to green electricity providers, there are some related theories about consumer behavior that should be considered. Furthermore, there are different possible approaches on how to analyze the switching unwillingness to green power vendors in the electricity sector. On the one hand, the analysis can concentrate on psychological factors on the basis of the human’s internal processes like for example understanding the role of norms and values of the human involved (Ajzen, 1991: 179). On the other hand, the analysis can concentrate on the role of external influences like for example social institutions, peer groups (Ozaki, 2011: 2) and other influences of the external environment (Ajzen, 1991: 179). The following theoretical approach takes both extremes into account by combining internal and external influences (Clark/Kotchen/Moore, 2003: 237) on behavior so as to later better explain non-switching behavior on a broad basis. Therefore, after a general explanation of the peculiarities of green electricity and related environmentalism in economic terms, the norm-activation model by Schwartz and the Theory of Planned Behavior by Icek Ajzen are introduced.

As non-switching behavior to a green electricity provider is considered as a measure based on environmental concern, the term ‘environmental concern’ has to clearly be specified in consumer behavioral terms. Moisander has defined an environmentally concerned consumer as a person “whose behavior exhibits and reflects a relatively consistent and conscious concern for the environmental consequences related to the purchase, ownership, use or disposal of particular products or services” (Moisander, 2007: 405). In general, environmentally relevant behavior as such takes in a special position in consumer behavior theory as there is no direct connection to “the type of utility-maximizing behavior assumed in standard economic models” (Ek/Söderholm, 2008: 170). Rather, environmental concern is a morally-motivated behavior instead of economically-motivated (Harland/Staats/Wilke, 1999: 2508). Therefore, in evaluational terms for the individual consumer, any kind of personal expenses or gains of economically-motivated decision making is exchanged for an evaluation in terms of right and wrong when dealing with environmental concern (Harland/Staats/Wilke, 1999: 2508).

One of the most applicable models relevant for the evaluation of non-switching behavior to a green electricity provider is the norm-activation model (NAM) by Shalom Schwartz. This model puts personal norms, defined as “self-expectations that are based on internalized values[5] ” (Harland/Staats/Wilke, 1999: 2524), into the center of behavioral influences and thus, of the decision making process (Schwartz, 1977: 222). These internalized values can be external influences that frequently surround the person in question, such as social norms, and are finally adopted by integrating these social norms into the individual’s own value orientation[6] (Harland/Staats/Wilke, 1999: 2507). Those mentioned internalized values result in “feelings of personal obligation to engage in a certain behavior” an thus, lead to the performance of the switching behavior (Harland/Staats/Wilke, 1999: 2507). Since there is a close tie between personal norms, which are centered by Schwartz’s NAM, and internalized values, these personal norms in effect also influence behavior. But, according to Schwartz, only when personal norms are ‘activated’, they can actually affect behavior (Schwartz, 1977: 222). For this activation criterion to be met, two conditions have to be fulfilled: Firstly, “someone is aware of the consequences of one’s behavior for the welfare of others” (Harland/Staats/Wilke, 1999: 2507) and secondly, “one ascribes at least some responsibility for these consequences to oneself” (Harland/Staats/Wilke, 1999: 2507). Still, the model was not yet adequate for apllication on environmentalism and thus, not on green power. Therefore, Schwartz has refined this NAM after more in-depth empirical research and adapted the model towards altruistic influences, keeping the activation criterion unchanged (Clark/Kotchen/Moore, 2003: 240). Hence, environmentalism could also specifically draw on the adapted NAM by Schwartz as it is also considered to be a pro-social act, (Harland/Staats/Wilke, 1999: 2524; Nilsson/von Borgstede/Biel, 2004: 268), and takes into account the well-being of other humans with a special emphasis on harm prevention to others (Stern/Dietz/Kalof, 1993: 324). As some surveys suggest, there are in fact positive relations between an altruistic value orientation and pro-environmental attitudes (Hansla/ Gamble/Juliusson/Gärling, 2008: 769).

The emergence of active environmentalism advanced research even more, directing at the special case of environmentalism in consumer behavior theory, and thus also embracing green electricity consumption in a more narrow and specific sense. The role of altruism for proenvironmentalism was lateron realized as a very characteristic part of the NAM as “proenvironmental behaviors may be considered to be opposed to immediate, clearly perceptible individual benefits for the environment are shared by the total population, are uncertain, and are distant in time and place” (Harland/Staats/Wilke, 1999: 2505). The importance of altruism in environmentalism was also realized by Stern et al as well as later on Moisander et al. Stern et al extended the approach of Schwartz even further by dividing Schwartz’s personal norms into three sub categories (Stern/Dietz/Kalof, 1993: 324). These three sub categories, which are social-altruistic, biospheric and egoistic, signify value orientations that guide behavior when activated (Clark/Kotchen/Moore, 2003: 238; Stern/Dietz/Kalof, 1993: 324). The social-altruistic value orientation refers, as mentioned earlier, to the concern for other people (Stern/Dietz/Kalof, 1993: 326) whereas the biospheric orientation refers to the “concern with nonhuman species” (Stern/Dietz/Kalof, 1993: 326). Furthermore, the third value orientation, called egoism, refers to the “self-interest” (Stern/Dietz/Kalof, 1993: 326) of the human in question. However, personal norms in all three categories set up by Stern et al are facing restrictions in their applicability when dealing with incurred costs for the person in question (Stern/Dietz/Kalof, 1993: 325). Monetary and thus egoistic issues lead to a much weaker willingness to act pro-environmentally in terms of social-atruistic and biospheric aspects (Stern/Dietz/Kalof, 1993: 339). In general, research in these three categories of Stern’s value orientations show that there is a negative relationship between egoistic value orientation and environmentally-friendly attitudes, strengthening the argument of negative cost influences (Hansla/ Gamble/Juliusson/Gärling, 2008: 769). A more in-depth analysis of empirical correlations and interactions are considered in the survey later in this paper. All in all, Schwartz’s NAM combined with Stern’s value orientations is a very promising measure to evaluate consumers’ switching inertia to green power vendors.

Another related theory apart from Schwartz NAM is called the Theory of Planned Behavior (TPB) by Icek Ajzen (Ajzen, 1991: 181). In general, the main emphasis in this theorem is placed on the behavioral intention as “the best predictor of future behavior” (Harland/Staats/Wilke, 1999: 2506) Therefore, the behavioral intention is the interface to actual behavior and so, relevant for green power switching. The behavioral intention of a human describes the willigness to actually behave in a certain way and thus, how strong the motivation for the performance is (Ajzen, 1991: 181). As a rule, the stronger the motivation for the behavioral intention, the higher the probability that the person in question actually engages in the particular behavior (Ajzen, 1991: 181-182). But a general premis for the rule to hold is that the behavior to be performed must render the possibility to be decided upon. If somebody else than the person in question decides upon the performance of the behavior anyway, the rule cannot be applied (Ajzen, 1991: 181-182). However, empirical evidence has shown that especially in environmental attitude-behavior relationships, the behavioral intention does not necessarily coincide with the behavior itself. This is due to the fact that other external influences such as economic restraints or situational peculiarities can also affect the decision making process (Ek/Söderholm, 2008: 170). Nevertheless, there are empirically proven strong correlations between the intention to engage in a behavior and the performance of the behavior (Ek/Söderholm, 2008: 171).

In order to find the determining components that guide the behavioral intention and hence behavior, Ajzen has defined three independent elements that have an impact on behavioral intentions (Ajzen, 1991: 188). The first element is the attitude[7] of the person in question towards the behavior (Harland/Staats/Wilke, 1999: 2506). The second element deals with social norms of the external environment and the third and final element affecting behavioral intention deals with the perceived behavioral control (Harland/Staats/Wilke, 1999: 2506)[8]. As a general rule, the higher the scores on these three components, the stronger the person’s intention to perform a behavior (Ajzen, 1991: 188).

The element that has the most influence on behavioral intention is the attitude towards the behavior (Ajzen, 1991: 188; Harland/Staats/Wilke, 1999: 2506). In more narrow terms, the attitude “refers to the degree to which a person has a favorable or unfavorable evaluation or appraisal of the behavior in question” (Ajzen, 1991: 189). However, although a person’s attitude is considered to be the best predictor for actual behavior, empirical evidence on environmental concern has shown that attitudes are often inconsistent with actions (Mainieri/Barnett/Valdero/Unipan/Oskamp, 1997: 192). On the one hand this observation is due to the faulty assumption that environmental behaviors are interchangable, meaning that if a person is taking part in a recycling program, the same person would automatically also participate in a green power program (Mainieri/Barnett/Valdero/Unipan/Oskamp, 1997: 192). On the other hand, there are also external variables apart from the three components formed by Ajzen such as unique situational characteristics that influence the decision making process (Mainieri/Barnett/Valdero/Unipan/Oskamp, 1997: 192).

Besides the attitude, another component affecting the behavioral intention and ultimately leading to the performance of the behavior is called subjective norm (Ajzen, 1991: 188). The term subjective norm itself “refers to the perceived social pressure to perform or not to perform the behavior” (Ajzen, 1991: 188). The critical difference between the underlying social norm in this context and the personal norm in the NAM by Schwartz is that the person concerned is committed and sanctioned by the social group (Harland/Staats/Wilke, 1999: 2508). Personal norms on the other hand are related to self-motivated commitment and sanctioning (Harland/Staats/Wilke, 1999: 2508). In comparison to the influence of attitude on the behavioral intention, subjective norm does not predict behavior as much as attitude does (Ajzen, 1991: 189). Empirical evidence has shown that a persons attitude towards the behavior puts aside fears of sanctions by social groups (Ajzen, 1991: 189).

Although both attitude and subjective norm affect behavioral intention and ultimately behavior, there is a third component that also determines ones motivation to engage in a certain behavior, namely the ‘perceived behavioral control’ (Ajzen, 1991: 183). The attribute ‘perceived’ clearly identifies the significant difference to the actual behavioral control as it does not identify objective and rational abilities to act (Ajzen, 1991: 183). Rather, the ‘perceived’ behavioral control clearly addresses the subjective element of how the person feels about the ability to perform the behavior (Ajzen, 1991: 183). Therefore, the self reflects experiences and possible hurdles to the behavior in question. An example for that could be a prior negative experience with green products due to a lack of quality that will hinder the person’s intention to buy another green product when faced with a similar situation (Ajzen, 1991: 188). Yet, perceived behavioral control is the least predictive component among the three as it is not steady across situations due to the fact that individuals perceive their ability to act differently when confronted with certain situation-specific peculiarities (Ajzen, 1991: 183; Bandura, 1982: 122). Furthermore, the behavior of a person highly depends on the self-confidence and trust in one’s own abilities, and thus in the perceived behavioral control (Ajzen, 1991: 184).

5. Motives for Non-Switching to a Green Electricity Vendor

Both, the TPB by Ajzen and the NAM by Schwartz, provide a fundamental basis for the analysis of the switching inertia in the electricity market. As electricity is a homogeneous good, the decision for green electricity in each household yields no extra physical benefit based on for example better quality (Gärling/Gamble/Juliusson, 2008: 613). Instead, the electricity remains the same without any physical product differences (Gärling/Gamble/Juliusson, 2008: 613) as the main attributes of electricity such as Ampere and Volt numbers are standardized. The only difference between conventional power and green power lies at the production stage regarding the source (Ek/Söderholm, 2008: 169-170). Thus, consumers consider moral components when deciding for green power since they do not distinguish conventional and green power on the basis of differences at the consumption stage such as quality or functionality (Ek/Söderholm, 2008: 170; Rowlands/Scott/Parker, 2003: 36). Especially the German electricity market emphasizes this moral component since consumers of green power put an extra effort into voluntary green power procurement (Rommel/Meyerhoff, 2009: 75). The governmental subsidies of the sector are already shared by the common burden principle (Menges/Traub, 2008: 263). Hence, a ‘deliberate’ green power supply highlights other reasons such as very high environmental concern, a perceived moral obligation and the inner willingness to act on behalf of that (Rommel/Meyerhoff, 2009: 75-76).

However, most German citizens do not procure green power even though their environmental awareness might be very high. In this context, there are two groups of potential green power rejectors that need to be distingiushed: the first group includes consumers who reject green power a priori for personal reasons rooted in their value systems or attitudes (Rommel/Meyerhoff, 2009: 77). The second group does not reject green power in the first place but refrains from procuring it due to reasons other than personal attitudes or values such as economic restraints (Rommel/Meyerhoff, 2009: 77). In fact, the most recent study of the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU - Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit) confirms that more than ninety percent of the German population has a high environmental concern (BMU, 2010 b: 38). Still, only eight percent of the population procures green power (BMU, 2010 b: 11). But, empirically proven, environmental relevant behaviors are not highly correlated among themselves and thus not exchangeable (Mainieri/Barnett/Valdero/Unipan/Oskamp, 1997: 192). Hence, it cannot be assumed that any environmentally concerned citizen would automatically procure green power when for example participating in recycling (Mainieri/Barnett/Valdero/Unipan/Oskamp, 1997: 192). In effect, environmental concern can be tackled on many different levels by consumers apart from switching to a green electricity vendor (Moisander, 2007: 404).

Though an environmentally friendly attitude might be a major factor in the decision making process according to Ajzen, it can be overshadowed by other decision-relevant factors such as cost issues (Mainieri/Barnett/Valdero/Unipan/Oskamp, 1997: 192). As a matter of fact, the main reason for non-switching behavior is rooted in the premium pricing of green electricity (Ozaki, 2011: 1). Notwithstanding, people sincerely approve green power, they are not necessarily disposed to pay a higher price for it because “partly different factors determine attitudes towards green electricity than willingness to pay for green electricity” (Hansla/Gamble/Juliusson/Gärling, 2008: 769). Gärling et al are criticizing this solely cost-based approach of consumers since this way of thinking paves the way for a ‘vicious cycle’ (Hansla/Gamble/Juliusson/Gärling, 2008: 769). The lower the participation in green electricity, the higher the price due to, among other issues, lost economies of scale (Hansla/Gamble/Juliusson/Gärling, 2008: 769). On the other hand, the higher the price, the lower the participation due to discouraged procurement (Hansla/Gamble/Juliusson/Gärling, 2008: 769).Still, price-based reasonings for the rejection of green power have increasingly become invalid in the recent years in that the Internet provides numerous platforms for price comparisons between all forms of conventional and green electricity (Rommel/Meyerhoff, 2009: 74-75). Already now, does the cheapest provider of green power offer cheaper electricity pricer per kilowatthour (kWh) than the most expensive conventional electricity provider (Rommel/Meyerhoff, 2009). Moreover, the cost-argument will loose more and more credibility as forecasts predict tremendous cost decreases and thus price decreases of green power within the next fourty years (Gresh/Radvanyi/Rekacewicz/Samary/Vidal, 2009: 92).[9]

Price comparisons using the Internet or price forecasts both illustrate that there are other, much more problematic reasons for non-switching. These linked reasons are the lack of transparency in the electricity sector, the lack of accurate information and the lack of trust on the consumer side (Rommel/Meyerhoff, 2009: 76). Even though common European measures such as certificate systems were implemented, aiming at making the green electricity market more transparent, they rather confuse already insecure potential buyers (Lange, 2007: 1; Moisander, 2007: 407). Combined with insufficient market transparency, especially information deficits about the market-specific background, including the certificate system[10], makes voluntary switchers be reluctant (Rommel/Meyerhoff, 2009: 77). If publicized information of the press are in fact true, cannot always be identified by consumers as they themselves are saturated with a mixture of reliable and unreliable information (Ozaki, 2011: 1). Empirical evidence strengthens the insufficient or inaccurate information as a reason not to switch. A survey by Rommel et al confirms that fourty per cent of the respondents are not generally opposed to switching but refrain from doing so because of, among others, insufficient and inaccurate information provision (Rommel/Meyerhoff, 2009: 80). Besides, if not already distrustful in the first place due information deficits, many potential consumers loose trust in green power because of the negative press which tremendously lowers the credibility of suppliers on the vendor-side and related laws on the governmental policy side (Moisander. 2007: 407). Apart from the controversial certificate system, the German market has reacted with the design of labels in order to counter transparency and information-related reluctance as well as distrust (Ajzen, 1991: 202). The BMU has identified that product labels would indeed be very helpful because they would in fact influence consumers’ purchase decisions (BMU, 2010 b: 39). Behind the newly developed labels such as ‘Grüner Strom label’ and ‘ok-power’ are clearly defined product check lists that makes it easier for consumers to identify standardized green electricity (Rommel/Meyerhoff, 2009: 81). But for the labels to function correctly, consumers would have to overcome the widespread information deficit and mistrust about green power in general so as to really understand the systems and advantages of the labeling. Consequently, the interest in green power and the incorporated information retrieval has to be activated more forcefully.

Another information-related obstacle to switching is concerned with the perceived extra effort to switch (Gerpott/Mahmudova, 2010: 465). The extra effort when switching links the physical cost-based obstacle of non-switching behavior with the lack of information. On the one hand, a deterrent factor of extra effort deals with the “perceived costs of information search associated with comparisons of different suppliers” (Gärling/Gamble/Juliusson, 2008: 614), including for example transaction and information-search costs (Rommel/Meyerhoff, 2009: 82). On the other hand, the extra effort is linked to a general inertia to switch to a green power supplier for other reasons than perceived costs of switching. However, the extra costs of information search when interested in switching the supplier has decreased significantly since the emergence of the Internet (Rommel/Meyerhoff, 2009: 75). Thus, switching to a green supplier has become very convenient and cheap due to Internet comparison homepages (Rommel/Meyerhoff, 2009: 75).

Those non-switchers who put forward the extra effort involved in the switching-process illustrate that the intrinsic motivation to switch, which is the most important component (Menges/Traub, 2008: 266; Rommel/Meyerhoff, 2009: 82), is by far too low (Gärling/Gamble/Juliusson, 2008: 613-614). Complicating issues even more, the homogeinity of the good electricity impedes the activation of a definite switching motivation that would put aside the switching inertia (Gärling/Gamble/Juliusson, 2008: 613-614). The consumers’ inability to connect their existent environmental awareness, their personal partial responsibility and the marginal effectiveness gravens the inertia to switch to a green supplier (Gärling/Gamble/Juliusson, 2008: 614; Harland/Staats/Wilke, 1999: 2507-2508). In this context, Schwartz’s NAM would suggest a test of the responsibility criterion in order to analyze if the person in question actually holds activated personal norms that connect environmental awareness to green power procurement. The potential consumer might be “aware of the consequences of his or her behavior for the welfare of others” (Harland/Staats/Wilke, 1999: 2507) but might not “ascribe responsibility for these consequences” to him or herself (Harland/Staats/Wilke, 1999: 2507). Thus, the actual activation of the particular personal norm does not take place due to a lack of compliance with the activation criterion, resulting in an ongoing switching reluctance of the consumer (Ek/Söderholm, 2008: 172).

On the other hand, the switching inertia is grounded in the consumers’s consideration that switching electricity providers is one, but not a personally relevant or just not the best perceived choice when dealing with environmental concern (Moisander, 2007: 405-406). As consumers have manifold possibilities to act environmentally friendly, they value other means of environmental action as more promising and relevant (Moisander, 2007: 406). If considering the TPB by Ajzen in this context, the switching inertia lies in the absence of external pressure by social norms (Gärling/Gamble/Juliusson, 2008: 613-614; Ozaki, 2011: 2). If social norms would permanently pressure the person, they would eventually diffuse into the person’s own value system and hence would lead to switching to a green supplier (Clark/Kotchen/Moore, 2003: 239). Though environmental awareness is very high throughout the German population (BMU, 2010 b: 38) the social pressure still seems insufficient to activate a switching incentive and overcome the widespread general inertia. This lack of social pressure lies in the daily irrelevance of product attributes of the good electricity as the purchase behavior of electricity is invisible because electricity is no physical visible good (Ek/Söderholm, 2008: 172+179). As product attributes at the consumption stage evaporate due to the homogeneity of the good (Rowlands/Scott/Parker, 2003: 36), the necessity to talk about electricity as such becomes nearly irrelevant and so, no social pressure is established (Ozaki, 2011: 2). If a strong social pressure would exist, the non-switcher would consider changing to a green electricity vendor (Ek/Söderholm, 2008: 178). Ek et al have investigated that “if others participate in green electricity schemes, the individual may experience a loss in her self-image as a morally responsible person if she does not choose to participate” (Ek/Söderholm, 2008: 178) and hence would also switch. In effect, the social norms are not yet strong enough since green power is not an important topic in everyday life communication. The lack of conversation about green electricity due to perceived irrelevance takes effect in that consumers tend to underestimate the potential of green power as a very promising possibility to act environmentally friendly among the manifold possibilities (Moisander, 2007: 405). Hence, consumers who refrain from switching because of the perceived extra effort do not value green electricity as a reasonable mean to act environmentally friendly and thus are either not sufficiently intrinsically motivated or they are not sufficiently externally pressured by social norms.

Besides the inertia to switch due to perceived extra effort, another factor contributes to non-switching behavior, namely loyalty. This loyalty to the current electricity supplier prevents consumers from switching to a green power supplier (Gärling/Gamble/Juliusson, 2008: 614). The cognition that loyalty is an obstacle to switch has in psychological empirical research become an explaining factor since loyalty is linked to a loss aversion (Gärling/Gamble/Juliusson, 2008: 614). This loss aversion is furthermore linked to the inner adherence to electricity security (Gärling/Gamble/Juliusson, 2008: 614). Not only does the general fear of under-supply of electricity play a major role, but also does the perceived under-supply of green power in this context, which undermines a certain quality aspect of green power as such (Ozaki, 2011: 2). Rommel’s survey in 2009 supports this approach as the empirical evidence confirms the fear of undersupply when purchasing green power (Rommel/Meyerhoff, 2009: 81). Again, consumers are heavily mal-informed as they think that the temporary power production of for example wind turbines, does not provide a permanent electricity supply although federal laws demand large buffers to prevent power shortcomings (Rommel/Meyerhoff, 2009: 81-82). Therefore, consumers remain at their current provider since their loyalty over years did not confront them with the necessity to rethink their own information endowment after all.

Besides the loyalty-related unwillingness to switch, consumers question the effectiveness of their own contribution (Ek/Söderholm, 2008: 172Moisander, 2007: 407). On the one hand, consumers question if their own procurement of green power would really result in an extension of green power production (Rommel/Meyerhoff, 2009: 81). On the other hand, consumers are insecure about the general effectiveness of their own switching behavior (Ek/Söderholm, 2008: 172). According to Moisander; “Consumers often feel that their contribution to environmental quality is marginal” (Moisander, 2007: 407). Issues about this marginal effectiveness of consumers’ green power consumption fuel questions like for example: Would the power in my socket really be green if I wanted to procure it? Would the green power production really increase if I signed up for green electricity (Ek/Söderholm, 2008: 175; Moisander, 2007: 407-408)? Hence, all those questions strengthen the sceptical attitude towards green power and develop a connection to the low trust aspect and the information deficit mentioned earlier (Ek/Söderholm, 2008: 175).

6. Empirical Investigation in the German Federal State of Mecklenburg-West Pomerania

6.1 Sampling Method & Data Collection

In order to empirically analyze the non-switching behavior with primary data, a survey has been conducted in the Federal State of Mecklenburg-West Pomerania (MWP) in spring 2011. In this context, the main aim of the creation of primary data is to identify the relevance of different motives for non-switching behavior as well as the analysis of the fulfillment criteria by the NAM and the TPB. Besides, non-switchers are simultaneously profiled and thus, provide a reasonable basis for companies to segment and address those non-switchers. The Federal State MWP provides a reasonable basis for the conduction as this state has the highest proportion of renewable energies in electricity production in Germany, which is fifty-one percent (Weiß, 2010). Therefore, the analysis clearly unfolds the proportion of conventional electricity recipients and their motives for non-switching despite the boost of green power production in the state.


[1] See Figure 1 and 2 in the Appendix.

[2] The price premium subsequently accompanies the rise in green power production. When the EEG came into effect in 2000, the subsidized green power supply was less than one billion Euro and led to a price premium of 0,2 cent/kWh. In 2009, subsidized green power supply has increased tenfold up to 10.78 billion Euro and thus, raised the price premium up to 1,3 cent/kWh (BMU, 2010: 19-21).

[3] This feed-in payment varies from 3.7 cent/kWh for hydro power up to 62.5 cent/kWh for solar energy (Christ/Bothe, 2007: 4), which is much higher (solar) than the actual electricity price of 23.2 cent/kWh in 2009 and therefore, very attractive for small-scale and large-scale investors (BMU, 2010: 20).

[4] See Figure 3 in the Appendix.

[5] In psychological terms values are defined as ‘guiding principles in a person’s life’ (Hansla/Gamble/Juliusson/Gärling, 2008: 769).

[6] Value orientation are considered as being ‘a cluster of several compatible values’ (Hansla/Gamble/Juliusson/Gärling, 2008: 769).

[7] In psychological terms the word attitude is defined as ‘an enduring set of beliefs about an object that predispose people to behave in particular ways toward the object’ (Mainieri/Barnett/Valdero/Unipan/Oskamp, 1997: 191).

[8] For a graphical review of the TPB please refer to Figure 4 in the Appendix.

[9] See Figure 5 in the Appendix.

[10] The Renewable Energy Certificate System of the European green power market rests upon a market where any power provider can ‘on paper’ buy electricity made from green sources as the product ‘electricity’ as such is divided into two parts: the physical electricity and the ‘virtual’ electricity through the certificate. If for example the German conventional power provider x has bought certificates from the Norwegian green power producer y, provider x is allowed to advertise this newly bought green power and hence lure new green consumers. Some public critics state that though no extra green power is produced, the consumer wrongfully thinks that he or she supports an increased green power production and this alienates already insecure potential switchers even more. (Lange, 2007: 1-2)


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Title: Green power already out of breath? Why do German consumers not switch to green electricity?