The combined effect of regulators’ and retailers’ actions to stimulate consumer participation in retail energy markets

Hester Huisman*, Evert de Haan, Machiel Mulder, Jaap Wieringa

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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Abstract

Active consumer participation in retail markets is crucial for an affordable and sustainable energy transition. While energy regulators encourage active consumer participation through policies which decrease consumers’ switching costs, energy retailers seek to advance customer retention to boost profits. This study investigates how these seemingly opposing goals influence consumer participation in energy retail markets. Using data on the Dutch energy markets, we combine micro-economic and marketing insights through a retailer-aggregated panel vector auto-regression (VAR) model and a market-level VAR to analyse the dynamic interactions. The results indicate that the regulator affects consumer participation both directly and indirectly through energy retailers’ actions. We conclude that energy retailers’ acquisition and retention actions do not counteract the regulator’s efforts to increase active consumer participation. While retention actions lead to decreased switching behaviour, they concurrently decrease perceived switch costs while increasing search behaviour and the consideration to switch. Therefore, retention actions may still improve consumer welfare. Our research reveals mediating relations that require comprehensive examination of the overall impacts of regulatory policies and energy retailer’s actions.
Original languageEnglish
Article number113890
Number of pages18
JournalEnergy Policy
Volume184
Early online date27-Nov-2023
DOIs
Publication statusPublished - Jan-2024

Keywords

  • Energy transition
  • Consumer participation
  • Switching costs
  • Regulation of retail markets
  • Energy retailers

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