Accounting for homeowners? decisions to insulate: A discrete choice model approach in Spain

Abstract

This paper assesses Spanish households' willingness to thermally insulate their homes and the drivers that influence such a decision-making process. Stated preference data were collected through a discrete choice experiment (DCE). The final sample of 191 respondents and 1,145 observations was analysed by the use of a mixed logit model, weighing the factors that encourage homeowners to carry out facade energy renovations or not. The model enables the quantitative estimation of renovation adoption rates depending on the households' characteristics and public support instruments in place. The results show that homeowners are extremely interested in increasing the thermal insulation of their homes. The actual investment cost required in the existing building stock is lower than the obtained willingness-to-pay. Furthermore, it was found a relevant effect of a variety of household features on renovation choice (income, age, heating system, etc.), which should be contemplated in the energy efficiency policy design. Additionally, a case analysis is performed which comprises 3 household categories. The results reveal that the required subsidy level is different in each case, sometimes even unnecessary, although all of them lower than the grants set by existing aid programs. Thus, to reduce the free-riding effect, a closer perspective would enable targeted support mechanisms towards each household category. Moreover, the policy performance can be improved by combining subsidies with other measures such as low-interest loans or increased tax rebates, which could contribute to improving the cost effectiveness of the public expense associated with direct grants. Overall, an increased tax rebate is preferred to soft financing, although the influence of the latter increases in low-income households.