CHOOSING THE GREEN ENERGY OPTION: Willingness to Pay of Metro Manila Residents for Solar Energy

摘要

The energy market in the Philippines remains to have one of the highest electricity rates inthe region averaging at US$0.15/kWh (PHP 7.5/kWh), excluding VAT, as opposed to the overallenergy market average of US$0.13/kWh (PHP 6.5/kWh). The movement towards renewable energy,specifically solar energy, will pose as an expensive one with the country’s energy sector providingFeed-in-Tariff rates as high as US$0.17/kWh (PHP 8.69/kWh) for solar energy power plants.Increasing the share of renewables at the current state of the energy regulatory background wouldyield a three-fold increase in residential electricity bills. The issue lies in the uniform charge thatconsumers bear regardless of where the electricity is sourced resulting in rates that only considercosts and not the consumers. But if they are given the option to choose where their electricity comesfrom, a number of consumers may potentially choose economically costlier sources of electricitydue to higher levels of utility coupled with the willingness to pay of consuming environmentallyfriendlysourced electricity. A contingent valuation survey was conducted to determine theirwillingness-to-pay for solar energy on a sample that was representative of Metro Manila to elicittheir willingness-to-pay and a Single Bounded Dichotomous Choice and Double BoundedDichotomous Choice analysis was used to estimate the amount they were willing to pay. The resultsshowed that Metro Manila residents are willing to pay a premium on top of their current electricitybill amounting to US$5.37 (PHP268.42) – US$8.71 (PHP435.37) per month, which is approximately0.80% - 1.29% of their monthly household income. It was also discovered that besides higherincome of households, a higher level of self-perceived knowledge on environmental awarenesssignificantly affected the likelihood of a consumer to pay the premium. Shifting towards renewableenergy is an expensive move not only for the government because of high capital investment butalso to consumers; however, the Green Energy Option—a policy mechanism which gives consumersthe option to decide where their electricity comes from—can potentially balance the shift of theeconomic burden by transitioning from a uniformly charged electricity rate to equitably chargingconsumers based on their willingness to pay for renewably sourced energy.