Dr. Rong Rong from the Department of Resource Economics at the University of Massachusetts Amherst will present the EEEP Seminar Series presentation on September 28, 2022.
Abstract: Greater adoption of renewable energy technologies by households is a key component of decarbonization and energy transition goals. While existing literature has examined how sociodemographic characteristics, “green” preferences, and peer effects impact adoption of new energy technology, the role of behavioral preferences has not been adequately studied. In this paper, we examine the effect of two types of behavioral preferences, namely the degree of risk tolerance (risk preference) and the attitude towards delayed reward (time preference) on the contract decision to lease or own a solar photovoltaic (PV) system. We develop a theoretical framework to show that the effect of risk and time preferences on the relative utilities from the two contracts is monotonic: Lower risk aversion and lower discount rate (more patience) implies a higher chance of solar PV ownership. To test these predictions empirically, we first estimate preference parameters from laboratory data collected from solar PV adopters. We then combine the parameter estimates with data on actual solar PV contract choice to examine the relationship between solar PV adopters’ time and risk preferences and their own-vs-lease choice. Our regression results confirm that less risk averse individuals have a higher tendency to choose the ownership option, and that more patient individuals are (weakly) more likely to own their solar PV systems. These findings contribute to a greater understanding of the role of behavioral factors in household decisions related to energy technologies.
Speaker Bio: Dr. Rong is an associate professor in the Department of Resource Economics at the University of Massachusetts Amherst. She is currently the co-director of Cleve E. Willis Experimental Economics Laboratory. Her research utilizes experimental economics methodology to address questions related to both managerial practices and public policies in environmental and health fields. She authored or co-authored many peer-reviewed publications in highly regarded economic and business journals, including European Economic Review, Journal of Risk and Uncertainty, Journal of Economic Behavior and Organizations, Organizational Behavior and Human Decision Processes, etc.