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Business Strategy and the EnvironmentBus. Strat. Env. 12, 3648 (2003)Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/bse.346

CONSUMERS AND GREEN

ELECTRICITY: PROFILING

POTENTIAL PURCHASERS

Ian H. Rowlands,1* Daniel Scott2 and Paul Parker1

1 University of Waterloo, Canada2 Meteorological Service of Canada, Environment Canada

Globally, consumers are beginning to beable to choose their electricity supplier.Increasing concerns about theenvironment are prompting some of themto consider green electricity that is,electricity that has been generated bymore environmentally sustainable means

(for example, solar power or wind power).This article profiles the potentialpurchaser of green electricity. Drawingupon the literature on green productpurchasers more generally, three sets ofhypotheses are presented morespecifically, it is proposed that those whowould pay increasingly higher premiumsfor green electricity are more likely topossess particular demographic

characteristics, attitudinal characteristicsand socialization characteristics.Responses from a survey distributed in amajor Canadian metropolitan area arethen examined. Attitudinalcharacteristics specifically ecological

* Correspondence to: Ian H. Rowlands, Environment andBusiness Program, Faculty of Environmental Studies, Universityof Waterloo, Waterloo, ON N2L 3G1, Canada.E-mail: [email protected]

Copyright 2003 John Wiley & Sons, Ltd and ERP Environment.

concern, liberalism and altruism bestidentify the potential purchasers of greenelectricity. Suggestions for managers andmarketers are made following thesefindings. Directions for future research arealso presented. Copyright 2003 JohnWiley & Sons, Ltd and ERP Environment.

Received 4 February 2002Revised 26 August 2002Accepted 27 August 2002

INTRODUCTION

S

ince the late 1990s, many parts of theUS$650 billion a year global electricity

market have been opened up to com-petition. For many residential electricity cus-tomers, it is no longer only a question ofhow much electricity do I want to use? butalso what kind of electricity do I want touse?. Unlike other consumer products, how-ever, it is not the characteristic of the deliv-erable itself in this case, the electron thatdifferentiates companies offerings in the mar-ketplace. Instead, it is the method by whichthese electrons have been generated. While

electricity has traditionally been created by


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CONSUMERS AND GREEN ELECTRICITY

means of large, centralized nuclear, hydro-electric or fossil-fuel power plants, growing

environmental concerns have served to spurgreater interest in alternative, more environ-mentally sustainable means of generating elec-tricity (for example, solar power or windpower). Indeed, it is on the basis of this char-acteristic the relative greenness of its gen-eration that many marketers are promotingtheir electricity products.

Little, however, is known about the potentialpurchaser of green electricity1. While severalstudies have been undertaken to try to ascer-tain how much of a premium for green (orgreener) electricity people would be willingto pay2 (e.g. Farhar, 1999; Roe et al., 2001), lim-ited attention has been paid to the extent towhich this subset of the general populationis different that is, characterized by uniqueattributes. Moreover, those few studies thatdo investigate the traits of potential greenelectricity purchasers (e.g. Ferguson, 1999; Bat-ley et al., 2001) largely restrict their analysisto demographic variables, such as age andincome. (One notable exception is the examina-

tion by Farhar and Coburn (2000) of the poten-tial market for grid-tied photovoltaic systems.)This is probably not especially surprising, par-ticularly given the recent comment by Larocheand colleagues about premium-priced greengoods more generally: . . . as far as we know,no study ever investigated factors that influ-ence consumers willingness to pay a higherprice for environmentally friendly products(Laroche et al., 2001, p. 507).

A more sophisticated understanding of thepotential green electricity purchaser would,however, clearly be valuable. As mentioned

1 This study focuses upon potential residential customersfor green electricity. For a recent investigation of potentialcommercial, industrial and institutional customers, see an articleby Wiser et al. (2001).2 It is generally accepted that whenever green electricity becomesavailable in a jurisdiction, it does so at a premium price. Indeed,green electricity that is currently available for purchase injurisdictions that have undergone restructuring (for example,England and Wales, and individual US states) generally costsmore than the conventional electricity against which it competes(see Rowlands et al., 2000, p. 103).

above, electricity markets in countries aroundthe world are being opened to competition.

If more environmentally friendly sources ofelectricity continue to make gains in thesemarkets (compare with Hirsh and Serchuk,1999; Dunn, 2000), then those who are ableto most quickly and accurately identify earlyadopters of green electricity will be in a strongposition to capture a significant share of thisnew market (compare with Shrum et al., 1995,p. 72). Hence, this article aims to begin to fillthis knowledge gap by presenting a case-studyof research undertaken in a major Canadianmetropolitan area. More specifically, the article

has two main purposes:

to profile consumers who state that theyare willing to pay progressively higherpremiums for green (or environmentallyfriendlier) electricity and

to elaborate business strategies that followfrom this improved understanding of thepotential green electricity market.

The article proceeds in six parts. After thisbrief introduction, the context is set in the next

section of the article. The case-study locationis identified and the survey that was utilizedis briefly introduced. The literature on greenproduct purchasers is then reviewed in thethird section to help to generate a series ofhypotheses. These hypotheses serve to proposewhich kinds of person are potential greenelectricity purchasers. Survey results are thenpresented in the fourth section and analyzedin the fifth, in order to test the aforementionedhypotheses. Finally, the findings are discussed,

limitations outlined and the key implicationsfor businesspeople noted and elaborated in thesixth section of this article. Directions for futureresearch are also identified in this final section.

CONTEXT

Study Location

Waterloo Region is a community of approxi-mately 450 000 people in southwestern Ontario

Copyright 2003 John Wiley & Sons, Ltd and ERP Environment Bus. Strat. Env. 12, 3648 (2003)

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I. H. ROWLANDS D. SCOTT AND P. PARKER

(Canada), located 100 kilometers west ofToronto Canadas largest city. By the terms

of the Canadian Constitution, electricity supplyprimarily comes under provincial jurisdiction.Consequently, the delivery of electricity to thepeople of Waterloo Region has traditionally

been the responsibility of a series of provin-cial and local electricity monopolies: OntarioHydro would generate the electricity (largelyusing nuclear, water and coal resources) andtransmit it to the region, and then local elec-tric utilities would distribute it throughout thiscommunity (Freeman, 1996).

In the mid-1990s, however, these traditionalmeans of electricity provision began to change.New legislation has already brought aboutthe unbundling of Ontario Hydro, corpora-tization of many of its key parts and theplanned privatization of others. Full compe-tition between many of Ontario Hydros suc-cessor companies (for example, Ontario PowerGeneration and Hydro One) and private sectorplayers will soon be forthcoming the OntarioGovernment announced that it planned toopen the marketplace on 1 May 2002. At that

time, it is anticipated that all customers inOntario will be able to select their own elec-tricity provider, some of which are anticipatedto be offering premium-priced green electricitypackages. (For an overview, see MEST, 2001.)

Survey

Against this background, a 158-item surveyinstrument was prepared in order to solicitpublic opinion about a range of energy andenvironment issues. It was initially devel-oped in accordance with the design principlesoutlined by Dillman (1978) and subsequentlyrevised after a limited pre-test (n = 37). Indi-viduals participating in a home energy eval-uation, through the Waterloo Region Resi-dential energy efficiency project (REEP; formore information see Parker et al., 2000), wereasked to complete the survey. Of the 1390questionnaires distributed throughout Water-loo Region between September 2000 and

September 2001 (that is, to each householdthat had a home energy evaluation completed),

596 were returned, for a response rate of 43%.Not all respondents, however, answered everyquestion that was used in the analysis for thisarticle. Selecting only those surveys that pro-vided complete responses, our investigationused 466 surveys (34% of all surveys dis-tributed).

Although a large number of responses werereceived, we recognize that our results arenot necessarily representative of other com-munities around the world, or even the onein which the survey was conducted. Com-pared to Waterloo Region as a whole (fromwhich our sample was taken), our respon-dents were older (average age of 50 yearsin our sample, 34 years in Waterloo Region),

better educated (in 54% of our respondentshouseholds, someone had completed univer-sity; while only 17% of all adults in WaterlooRegion have completed university), wealthier(median household income of approximatelyC$70 000 versus C$60 000) and had a relativelyhigher share of male participants (61% ver-

sus 49%). Moreover, respondents had alreadydemonstrated their willingness to pay at leastC$25 for a home energy evaluation, which sug-gests a special interest in energy issues. Addi-tionally, results may have been influenced bythe fact that participating residents were oftenengaged in a discussion about energy issues bythe evaluator and his/her student intern dur-ing the home energy evaluation respondentsmay have therefore wanted to display sociallyaccepted behaviour (Scott, 1999, p. 276). How-ever, given that our analysis involves compar-isons of answers received from various respon-dents, it may be the case that there was anequal degree of overstatement by all respon-dents. Regardless, we are confident that theresults provide an interesting snapshot of theopinions of Waterloo Region respondents.

Finally, we recognize the limitations aris-ing from the fact that we are investigatingintentions rather than actions. It is certainlynot always the case that a particular kind of


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environmental intention (in this case, a statedwillingness to pay a premium for green elec-

tricity) will necessarily be followed by an asso-ciated environmental action (in this case, theactual purchase of green electricity when themarket opens). A study by Simmons MarketResearch Bureau (1991), believed to be the firstto link buying behavior with consumer atti-tudes on the environment, found that peoplein the U.S. do not actually buy the productsthey claim to prefer. High concern over theenvironment was found, but behaviors con-sistent with such concern were lacking (cited

by Roberts, 1996, p. 218; see also Kalafatiset al., 1999, p. 443; Roberts and Bacon, 1997).Scott (1999, p. 271) confirms this: Reviews ofthe volume of work dedicated to assessinglinkages between (general) environmental atti-tudes and proenvironmental behaviors havegenerally concluded that such relationships arerather tenuous. Indeed, work on green elec-tricity lends support, for only a small shareof those who say they will pay more actu-ally do so when given the opportunity (Row-lands et al., 2000, p. 108). Ideally, we would

have investigated actual consumer behavior.However, given the only recent introductionof green electricity, few opportunities exist tostudy this phenomenon. We, therefore, pro-ceed with what we believe to be a reasonablealternative.

RESEARCH HYPOTHESES

Given that there has been relatively littlestudy of the characteristics of green electricitypurchasers, we turn to the literature thathas investigated the broader category of thegreen product purchaser to generate ourresearch hypotheses. We review this literaturein order to identify the kinds of characteristicthat analysts argue are useful in identifyingconsumers who have purchased or who haveindicated that they intend to purchase greenproducts. Our investigation suggests that itis useful to divide this literature into three

parts. In this section, we review each partand generate a series of research hypotheses

regarding possible characteristics of potentialpurchasers of green electricity.So-called demographic characteristics are

often used in efforts to characterize or pro-file potential purchasers of green products.This is because such characteristics are easyto assess and therefore have the potential to

be extremely valuable in market segmentation(Balderjahn, 1988, p. 53). Generally, much ofthe literature has led marketers [to adopt] anupscale profile of the ecologically consciousconsumer: high income, more education, andprestigious occupation (Roberts, 1996, p. 219).Notwithstanding the criticisms of the con-clusions behind these observationsRoberts(1996, p. 218), for example, argues that therehave been inconsistent results with suchstudies it is widely accepted that demo-graphic characteristics still merit investigation(e.g., Laroche et al., 2001, p. 505).

Justification for this conventional profile ofthe green product purchaser comes from manyquarters. Straughan and Roberts (1999, p. 560),

for example, cite a number of different studiesthat explore the expectation that individualscan, at higher income levels, bear the marginalincrease in costs associated with supportinggreen causes and favoring green product offer-ings. Similarly, Granzin and Olsen note thatEducational levels have been linked to greaterconcern for the environment and greater likeli-hood of participation in environmental protec-tion activities (1991, p. 2).

Other demographic characteristics usuallyinvestigated in the study of green productpurchasers include age and gender. Withrespect to the former, the general belief isthat younger individuals are likely to be moresensitive to environmental issues. There area number of theories offered in support ofthis belief, but the most common argumentis that those who have grown up in a timeperiod in which environmental concerns have

been a salient issue at some level, are morelikely to be sensitive to these issues (Straughan


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and Roberts, 1999, p. 559). With respect to thelatter, meanwhile, women, as a result of social

development and sex role differences, morecarefully consider the impact of their actions onothers (Straughan and Roberts, 1999, p. 560).Race and the urban/rural divide are amongsome of the other demographic variablesthat have been studied (e.g. Murphy et al.,1978; Zimmer et al., 1994). These demographiccharacteristics led us to examine a number ofhypotheses in this study.

(i) Hypotheses related to demographic character-istics. The level of stated willingness to pay

a premium for green electricity is hypoth-esized to increase for respondents who live in a household with a larger income

(H1) live in a household in which someone

has more formal education (H2) are younger (H3) are female (H4) have greater knowledge about energy

issues in their community (H5).

Complementing analyses of demographic

characteristics have been investigations of arange of other characteristics. Although notnecessarily identical, alternative terms thathave been used to describe some of these char-acteristics include sociopsychological vari-ables (Anderson and Cunningham, 1972), per-sonality variables (Kinnear et al., 1974, p. 21),psychographic variables (Granzin and Olsen,1991, p. 2; Shrum et al., 1995, p. 72), attitudinalvariables (Roberts, 1996) and life-style pro-files (Wagner, 1997, p. 23). Examples of these

kinds of non-demographic characteristic inves-tigated that are often mentioned as particularlyvaluable include

perceived consumer effectiveness (thatis, a measure of the extent to which arespondent believes that an individualconsumer can be effective in pollutionabatement (Kinnear et al., 1974, p. 21;see also Ellen et al., 1991; Laroche et al.,2001, pp. 506507)),

liberalism (Democrats and liberals aremore concerned about environmen-

tal quality than are their Repub-lican and conservative counterparts(Roberts, 1996, p. 219, citing Van Liereand Dunlap, 1980; see also Dun-lap, 1975; Samdahl and Robertson,1989)),

altruism (. . . an individual is awareof harmful consequences. . . to oth-ers from a state of the environ-ment and when that person ascribesresponsibility. . . to herself or himselffor changing the offending environmen-tal condition (Stern et al., 1993, p. 324,identifying it as Schwartzs theory ofaltruism; see also the discussion byLaroche et al. of collectivism (2001,p. 506))) and

ecological concern (. . . general envi-ronmental attitude and [individuals]perception of the necessity for soci-etal change commensurate with theconcept of sustainable development(Scott, 1999, p. 279, following Blaikie,

1992)).

These characteristics led us to examine anumber of hypotheses in this study.

(ii) Hypotheses related to attitudinal character-istics. The level of stated willingness topay a premium for green electricity ishypothesized to increase for respondentswho increasingly believe that individual con-

sumers can improve the environment(H6)

hold more liberal attitudes (H7) are more altruistic (H8) display greater ecological concern (H9).

Together, these first two sets of characteris-tics namely, demographic characteristics andattitudinal characteristicshave been identi-fied as key elements of the first stream ofresearch in research on marketing and the


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environment (Kilbourne and Beckmann, 1998,p. 515). In these cases, the level of analysis was

primarily the individual, and, given that theintention was to derive consumer character-istics useful in defining an environmentallyconcerned market segment, . . . it can be arguedthat the research was predominantly manageri-alist in perspective (Kilbourne and Beckmann,1998, p. 519).

Other approaches have moved beyond afocus upon the individual and have consid-ered the broader social context. For exam-ple, Webster developed the so-called socialinvolvement model, which suggests that thesocially conscious consumer will be moreinvolved in community affairs (Webster, 1975,p. 191). In a similar vein, Granzin and Olsennote that, in general, researchers have linkedinterpersonal influence to consumption-related

behavior. . . .Perceived commitment to envi-ronmental protection by ones spouse, fam-ily members, friends, and neighbors waslinked to ones own commitment to conser-vation (Granzin and Olsen, 1991, p. 4, citingothers work). Shrum and colleagues, more-

over, have found that the green consumer. . .talks with others about products (1995,p. 80). These socialization characteristics ledus to examine a number of hypotheses inthis study.

(iii) Hypotheses related to socialization characteris-tics. The level of stated willingness to pay

a premium for green electricity is hypoth-esized to increase for respondents who are more involved in community affairs

(H10) believe more firmly that members of

their own social network are trying toimprove the environment (H11)

more frequently discuss energy andenvironment issues (H12).

Useful summaries of the literature on pur-chasers and potential purchasers of green

products may be found in the work of Granzinand Olsen (1991, p. 2), Kilbourne and Beck-mann, (1998, especially Table 1), Roberts (1996,especially Table 1), Schwepker and Cornwell(1991, especially Table 1) and Straughan andRoberts (1999, pp. 559562). In the next sec-tion of this article, we draw upon our surveyresults to test these 12 hypotheses.

MEASURES

Dependent VariableThe key discriminating action we had hopedto investigate was the purchase of green elec-tricity. As noted above, however, the pur-chase of green electricity is not yet possible

Table 1. Results of Spearmans correlation calculation between S-Green and various constructed variables

Hypothesis Variable Kind of hypothesis Spearmans correlation

H9 Ecological concern Attitudinal 0.246

H7 Liberalism Attitudinal 0.242

H8 Altruism Attitudinal 0.200

H2 Education Demographic 0.193

H6 Perceived consumer effectiveness Attitudinal 0.187

H3 Age Demographic 0.163

H1 Income Demographic 0.136

H10 Participation Socialization 0.133

H12 Communication Socialization 0.101

H6 Knowledge Demographic 0.084H5 Gender Demographic 0.040H11 Others Socialization 0.036

p < 0.05;p < 0.01.


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in Ontario. Therefore, we are obliged to inves-tigate potential purchasers of green electric-

ity. Accordingly, respondents were asked thefollowing question:

How much extra would you be willing topay on your electricity bill each month toensure that all of the electricity you usecomes from Green sources? (check onlyone) [emphasis in original].

Five options were then presented:

$0 dont want green

$5/month $10/month $25/month $50/month.

Of the 466 respondents, almost half (45%)selected $10/month. A large share of theremainder was almost equally divided between$5/month and $25/month (21% and 24%,respectively). Finally, 6% answered that theydid not want green electricity, while 5% ofrespondents indicated that they would pay$50/month. As the dependent variable, wecoded responses from 1 (for $0dont wantgreen) through 2, 3, 4 and finally to 5 (for$50/month). We call this variable S-Green(stated willingness to pay a premium for greenelectricity), and this coding was used in thesubsequent analysis.

Potential Independent Variables

To explore the 12 hypotheses presented above,

12 potential independent variables were devel-oped. In this section, we present them.Following from the five hypotheses related

to demographic characteristics (H1 H5 above),the following five variables were constructed.

H1. Incomeof the household, before taxes,in Canadian dollars:1. under $40 000 (12% of respondents);2. $40000$59,999 (22%);3. $60000$79,999 (25%);

4. $80000$99,999 (19%);5. $100 000 and over (22%).

H2. Education highest level achieved bysomeone in the household (some gradeschool; completed high school; college ortechnical diploma; some university; univer-sity (bachelor) degree; second or graduatedegree (masters; Ph.D.)). Responses wereregrouped into four categories:1. some grade school; or completed high

school (11%);2. college or technical diploma; or some

university (35%);3. university (Bachelor) degree (32%);4. second or graduate degree (Masters;

Ph.D.) (22%). H3. Age of survey respondent and reported

in years. Responses were subsequentlyregrouped into six categories:1. 2029 years (5%);2. 3039 years (21%);3. 4049 years (25%);4. 5059 years (23%);5. 6069 years (18%);6. 70 years and over (9%)3.

H4. Genderof survey respondent:1. female (39%);2. male (61%).

H5. Knowledge. Respondents were asked toidentify the three largest sources of electric-ity in Ontario, ranked in terms of first,second and third (compare with previ-ous studies of the importance of ecoliter-acy, e.g., Laroche et al., 2001, p. 505). Ninechoices were offered: nuclear, solar, hydro(large and small scale), natural gas, wind,landfill gas, coal, burning municipal garbageand hydrogen. In fact, the province receivesmore electricity from nuclear power sta-tions (just under 40% of the total electric-ity generated in Ontario) than any othersource hydroelectric power and coal com-pete for second and third position (26 and23%, respectively; derived from OPG, 2001).

3 Note that figures do not necessarily add up to 100%, becauseof rounding.


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Consequently, we assigned a mark of 4

to those 15% of respondents who correctly

identified nuclear as first, hydroelectric aseither second or third and coal as either sec-ond or third. We gave a mark of 3 to thosewho had these three resources in any otherorder (an additional 25% of respondents), amark of 2 to those who only had two ofthese three resources, in any order (52% ofrespondents) and a mark of 1 to those whoonly had one of these three resources identi-fied correctly (6% of respondents). All otherrespondents were given a mark of zero (3%of respondents).

Following from the four hypotheses relatedto attitudinal characteristics (H6 H9 above),the following four variables were constructed.

H6. PCE response to the statement Even ifeveryone tried to conserve energy at home,it wouldnt make a big impact on energy usein Canada:1. strongly agree (3%);2. agree (7%);

3. unsure (7%);4. disagree (47%);5. strongly disagree (36%).

H7. Liberalism response to the statementGovernment should let industry decide how

best to supply energy and conserve energy:1. strongly agree (3%);2. agree (10%);3. unsure (18%);4. disagree (40%);5. strongly disagree (29%).

H8. Altruism response to the statementI am very concerned about how climatechange will affect future generations ofCanadians:1. strongly disagree (0%);2. disagree (8%);3. unsure (14%);4. agree (50%);5. strongly agree (28%).

H9. Ecological concern response to the state-ment The seriousness of environmental

problems is exaggerated by environmental-ists (compare with Scott, 1999, pp. 279281):

1. strongly agree (3%);2. agree (7%);3. unsure (19%);4. disagree (39%);5. strongly disagree (32%).

Following from the three hypotheses related toattitudinal characteristics (H10 H12 above), thefollowing three variables were constructed.

H10. Community involvement in either (or both) a community service group (Cancer

Society, Big Sisters, Minor Hockey, LionsClub) or/and an environmental organiza-tion (either as a volunteer or through finan-cial support):1. involvement in neither (62%);2. involvement in one or the other (32%);3. involvement in both (6%)4.

H11. Others perceived energy efficiency ofanother member of their social network5:1. wasteful of energy (2%);2. intermediate Likert-type option (5%);

3. intermediate Likert-type option (25%);4. intermediate Likert-type option (38%);5. very energy efficient (30%).

H12. Communication frequency of discussionabout energy conservation with others6:

4 Unlike all other potential independent variables, our participa-tion variable does not utilize responses on a Likert-type scale.Instead, it reveals membership of a group or not (or, as aggre-gated, membership of two, one or zero groups). Consequently, itis not directly comparable with the other potential independentvariables being investigated in this study. Nevertheless, giventhe exploratory nature of our investigation, we still thought ituseful to include.5

We asked respondents to tell us how energy efficient theythought that their parents, their spouse/partner and theirchildren were. The choices available were wasteful of energy(coded 1), through a Likert-type scale of three other options(2, 3 and 4), ending with very energy efficient (coded 5).An option of not applicable was also available for selection.Recognizing that not everyone may have any one (or more) oftheserelatives, we codedresponses by looking at therespondentssingle response that was indicative of the most energy efficientrelation. For example, if an individual responded 4 (to parents),2 (to spouse/partner) and 3 (to children), their answer wouldbe taken to be 4.6 We asked respondents how often they discussed energy con-servation with friends/family, neighbours and co-workers.The choices available were not at all, occasionally (every few


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1. not at all (11%);2. occasionally (every few months) (62%);

3. frequently (every month) (22%);4. very frequently (every week) (5%).

ANALYSIS AND RESULTS

Table 1 presents the Spearmans correlationcoefficient for each of the 12 variables (ascompared with S-Green that is, stated will-ingness to pay a premium for green electric-ity). Nine of the 12 hypotheses were sup-ported (relationship significant at the 5% level).

Indeed, eight relationships appear especiallyclose (significant at the 1% level). To givefurther substance to these findings, note thatamong respondents who scored either 4 or 5on our ecological concern scale (331 respon-dents), 31% said that they would pay at leasta C$25 a month premium for green electricity(compared with 20% of all other respondents),while only 4% of such respondents said thatthey would not pay more for green electricity(compared with 13% of all other respondents).

Only knowledge, gender and others werenot significant at either 1 or 5% levels.

IMPLICATIONS AND CONCLUSIONS

Before turning to the managerial and aca-demic implications of our findings, we feelit important to briefly remind the reader oftwo key limitations to our investigation, andto highlight two additional limitations as well.First, as mentioned earlier, our dependent

variable was stated willingness to pay apremium for green electricity, rather thanthe preferred actually paid a premium for

months), frequently (every month), very frequently (everyweek) or not applicable. Again, recognizing that not everyonemay have co-workers, family (or even friends) with whichto discuss issues of energy conservation, we coded responses bylooking at the respondents single response that was indicativeof the most activity. For example, if an individual respondedoccasionally (to friends/family), not at all (to neighbours) andfrequently (to co-workers), their answer would be taken to befrequently.

green electricity. Consequently, we were seek-ing to explain a (self-reported) environmental

intention, rather than an (externally verified)environmental action. As markets for greenelectricity grow, surveys should be under-taken among green electricity customers, todetermine whether their attitudes are similar tothose found among the potential purchasersof green electricity we examined. Second, thesample, although large, is not necessarily rep-resentative of the broader community (Water-loo Region), let alone other communities inNorth America or around the world. Conse-quently, additional work focused upon the par-ticular green product examined in this article(that is, green electricity) should be undertakenin other communities to identify similaritiesand differences.

Third, there may well be differences inrespondents understanding as to what is con-sidered to be green electricity. As notedabove, the survey gave no suggestion to therespondent as to what was meant by the termgreen sources. (Other surveys identify what isimplied by green by giving particular exam-

ples as part of the question.) Instead, it wasleft to the respondent to determine that, andthen to answer accordingly. Therefore, not allrespondents may necessarily have been con-sidering the same product when answeringthe question about willingness to pay a pre-mium for green electricity. Differences in per-ception as to what qualifies as green are cer-tainly worthy of investigation. In other work(see Rowlands et al., 2002), we have exploredthis further.

Fourth, there are different ways in which thevarious variables could be constructed. Insteadof using a Likert-type scale for the dependentvariable (S-Green), actual premiums (in dollarterms) could be volunteered by respondents.Similarly, a more elaborate investigation ofthe potential independent variables could beundertaken. For example, instead of presentingincome levels in broad groups (which meantthat a household earning C$60 000 was deemedto be identical to one earning 33% more,


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or C$79 999), specific (or at least more dis-aggregated) information could be obtained.

Moreover, constructs for attitudinal character-istics (liberalism, PCE, altruism and ecologicalconcern) could involve responses to a rangeof questions/statements instead of just one ineach case.

Nevertheless, given that the specific topicthat we investigate in this article namely, thecharacteristics of consumers who say that theywould pay progressively higher premium forgreen electricity is quite new, we feel thatit is appropriate to identify some implica-

tions for business strategies arising from thesefindings. We recognize, however, that becausethis investigation is only exploratory, our sug-gested strategies are only preliminary. Wehope to initiate more discussion about, and toencourage further study of, this environmen-tally influential, and economically significant,sector of our society.

First, there appears to be a continuing mes-sage of warning to marketers who think thatthey should base their segmentation criteria(and hence, their marketing strategy) solelyupon demographics. Indeed, the recent con-clusions of Straughan and Roberts can beapplied to our investigation, virtually ver-

batim: From the results of both past stud-ies and the present work, the use of eithera psychographics-only model (incorporatingPCE, altruism, and EC [environmental con-cern]) or a mixed model (incorporating a rangeof demographics and psychographics) should

be preferred to traditional demographic pro-filing methods (Straughan and Roberts, 1999,

p. 567).Indeed, as Table 1 suggests, many of the atti-

tudinal characteristics appear to be especiallysignificant. While few may be surprised bythe importance of ecological concern (becauseones stated willingness to pay progressivelyhigher premiums for green electricity mayalso be viewed as a declaration of ecologicalconcern), it may indicate that respondents

believe that their energy choices have direct

consequences for the condition of the envi-ronment (something that should perhaps not

be assumed). In any case, what may bemore revealing is the importance of liber-alism. This finding supports past specula-tion about the nature of the green electricitypurchaser: . . .customers may respond better toprograms offered by municipal utilities ratherthan investor-owned [ones] (Farhar and Hous-ton, 1996, p. 19). Liberalism may also be use-ful for businesspeople as a profiling variable.Areas that have elected liberal candidates orare known to have residents that hold lib-

eral views might be key targets for market-ing campaigns. Others argue that the impactof liberalism on [ecologically conscious con-sumer behavior] would suggest that the use ofspokespeople perceived to share similar viewswould improve perceived argument strength(Straughan and Roberts, 1999, p. 569). Indeed,a similar kind of case could be made followingthe high position of altruism in Table 1.

The relatively strong explanatory value ofPCE (perceived consumer effectiveness; seeTable 1) suggests that marketing campaignsshould highlight the positive environmentalimpact of purchasing green electricity by, forexample, prominently highlighting the tonnesof pollution eliminated as a result of a specificgreen electricity facility. Indeed, experiencehas borne this out: Several utilities contactedsaid that programs focusing on a well-definedrenewable energy project are apt to be moresuccessful in gaining a higher level of customercost commitment than those that are aimed atdeveloping renewables in general (Farhar and

Houston, 1996, p. 21). Additionally, as Wiser(1998, p. 116) argues, there may be benefitto tying the purchase of green electricity tohealth benefits: wherever possible, green mar-keters should make the environmental benefitsof their products as personal as possible; forexample, appealing to personal health ratherthan general reductions in air pollution levels.Wohlgemuth and colleagues (1999, p. 379)support this by calling it value: In the green


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electricity market, value centres on the envi-ronmental benefits customers perceive that

they are getting from their power purchases.. . .One of the most important lessons learnedin green electricity marketing in the US is thatcustomers are willing to pay a premium forgreen electricity, but this willingness to pay forgreater ecological value depends a great dealon how well the power companies can docu-ment and market the environmental benefits oftheir green electricity products.

Although demographic characteristics werenot found to be the most useful in our investi-gation, three of them namely, education, ageand income still had significance. Accord-ingly, they could effectively be employedin profiling the potential purchaser of greenelectricity. The conventional wisdom (amonggreen product developers more generally, thatis) that suggests that women should be thetarget market was not supported. The tech-nological nature of the product may explainwhy the traditional gender divide does notappear as significant (compare with Farhar andCoburn, 2000).

Finally, although all three socialization char-acteristics appear in the bottom half of Table 1,we should still recognize that two of them hadsignificance at the 5% level indeed, partic-ipation was significant at the 1% level. Thefact that the level of peoples participation incommunity groups was a significant indicatorof interest in premium-priced green electricitysuggests that marketers should establish linkswith local groups. Indeed, we have alreadyseen that the local element has been flagged asimportant by analysts of potential green elec-tricity markets: . . .local subsidiaries may bemore successful at green marketing than multi-state or multi-national corporations seen ashaving little interest in the community (Wiser,1998, p. 113). Our findings lend further supportto this observation.

Notwithstanding these suggestions to mar-keters of green electricity, it is still clearthat there is no single factor that completelydominates. The recent comments by Kilbourne

and colleagues appear to have been con-firmed: No clear consensus regarding envi-

ronmentally concerned consumers and whatthey want, what they will do, or how tomeasure them has emerged (Kilbourne et al.,2002, p. 194). Our findings suggest closerelationships, but not unequivocal ones.

For the researcher, there is much oppor-tunity for additional work in many of theareas mentioned above. Indeed, as investiga-tions into the green product purchaser con-tinue to move beyond simple demographicprofiles, attitudinal and socialization charac-teristics should be further studied. Moreover,given the relative lack of work undertaken ongreen electricity, it is certainly worth investi-gating further the extent to which this particu-lar green product is different from other greenproducts perhaps because of its technologi-cal nature or its intangibility. Qualitative workinvolving open-ended surveys, focus groupsand the like could usefully complement thequantitative analysis undertaken in this inves-tigation. Clearly, more work on the businessprospects for green electricity is warranted.

This article had two main purposes. First,it aimed to profile consumers who state thatthey are willing to pay progressively higherpremiums for green (or environmentallyfriendlier) electricity. By reviewing the liter-ature on green product purchases more gener-ally, three sets of hypotheses were proposed.Using survey data collected in a major Cana-dian metropolitan area, these hypotheses werethen tested. Although nine of the 12 were con-firmed, the strength of the relationship withattitudinal characteristics was found to be thestrongest. The second purpose of the articlewas to elaborate business strategies that fol-low from an improved understanding of thepotential green electricity market. The businessimplications of the strongest relationships wereexamined, with strategies for marketers sug-gested. Additional work into the prospects forgreen electricity was also encouraged. Indeed,given the environmental impact of electricityuse around the world, and the potential size


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of the global green electricity market, a betterunderstanding of the green electricity pur-

chaser would appear to be both a societalimperative and a business asset.

ACKNOWLEDGEMENTS

Support for this research was provided by the SocialSciences and Humanities Research Council of Canadaand the Climate Change Action Fund (Governmentof Canada). The Waterloo Region Residential EnergyEfficiency Project (REEP) is a partnership of theUniversity of Waterloo (Faculty of EnvironmentalStudies), the Elora Centre for Environmental Excellence(Green Community Association), Environment Canada

(Adaptation and Impacts Research Group) and NaturalResources Canada (Office of Energy Efficiency).

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BIOGRAPHY

Ian H. Rowlands (corresponding author) isDirector of the Environment and BusinessProgram, Faculty of Environmental Studies,University of Waterloo, Waterloo, ON N2L3G1, CANADA.Tel.: +1-519-888-4567 ext. 2574.

Fax: +1-519-746-0292.E-mail: [email protected] Scott is a Research Scientist with

the Adaptation and Impacts Research Group,Meteorological Service of Canada, Environ-ment Canada.

Paul Parker is Director of the Local Eco-nomic Development Program, Faculty ofEnvironmental Studies, University of Water-loo, Canada.


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consumers and green electriciy

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