Energy Efficiency

Determinants of households’ private investments in energy efficiency improvements in South-Central regions of Chile (CATIE-LACEEP)

LACEEP is a program that promotes the training of Latin American researchers focused on the use of environmental and natural resource economics tools and concepts.

Supported by LACEEP, the project investigated, firstly, the determinants of central-southern Chilean households’ investments in energy efficiency measures for their houses. And, secondly, it investigated the role played by potential savings (associated with a lower energy demand for heating)
and uncertainty (associated with the ambiguity about future savings). The purpose of this study was to promote the creation of solutions that would increase residential adoption of energy-efficient technologies, thus improving the living conditions of Chilean families and their environment.

To this end, in 2018 an economic experiment was carried out on a sample of 216 decision-makers (householders) in the city of Valdivia. Interviewees had to decide between hypothetical options for thermal retrofit of their houses.
These options were associated with a specific cost, a set of public and private financial support instruments, and a level of incertitude regarding the energy gains obtained as a result of the intervention.

Results indicated that the type of funding played a major role in their decision to invest. Besides, a preference was observed for mixed funding that combines the use of own resources and medium-term loans. Simultaneously, people showed less willingness to take long-term loans associated with mortgages or others. The potential savings in heating
—resulting from thermal retrofit— was the second element taken into account by the interviewees when making a choice. Meanwhile, uncertainty associated with such savings —although it had a statistically significant effect— turned out to be less influential on the decision to invest.

These results have an important role to play in introducing effective public policies consistent with users preferences. Reducing costs associated with heating a house is a compelling reason for families to adopt energy efficiency measures, thus triggering energy transition processes.

[Photography by B. Thanyakij]