Objective and Subjective Measures of Willingness to Pay for Green Electricity: Do They Measure the Same? Evidence from a South African Case

A historic first step regarding Green Energy usage in Cape Town, South Africa, was taken in March 2010. The residents of Cape Town now have the opportunity to buy green electricity from the city. However, the actual experience of renewable energy (Green Electricity (GE)) is new to many residents, especially in a developing country such as South Africa. For policy and feasibility purposes it is relevant to know how much extra users are willing to pay for this energy source. Therefore, this research investigates the relationship between residents' attitudes towards the environment and their willingness to pay. For this, subjective and objective measures of willingness to pay extra for GE are distinguished. Data from 405 residents was collected using questionnaire surveys. Multivariate analysis using OLS regression was performed and showed that positive attitudes towards the environment increased the residents' willingness to pay extra for GE (subjective measure). However, these environmental attitudes do not influence the maximum amount in ZAR that the residents are willing to pay extra (objective measure); monthly income plays the most significant role in this scenario. The findings in this research show on the one hand that predicting the willingness to pay extra for GE seems to depend on the type of measure applied. On the other hand, these findings indicate that policy makers should be careful using specific measures of willingness to pay when assessing the feasibility of the introduction of GE.