Power of Your Choice - An Empirical Study of Origin-Specified Electricity Contracts in Sweden

Abstract: The purpose of this thesis is to study some aspects of origin-specified electricity contracts in Sweden. Consumers may choose a contract for which the electricity is specified to originate from for example renewable resources, or from one exclusive energy source such as solar, wind, hydroelectric or nuclear power. The study is mainly based on data over supplied electricity contracts for households in January 2020, obtained from Energimarknadsinspektionen. Horizontal product differentiation theory is applied to study the correlation between the market share of a firm and the number of origin-exclusive contracts offered by the firm. A statistically significant, low-to-moderate correlation coefficient of 0.426 is found, meaning that larger firms tend to offer a higher number of origin-exclusive alternatives. Vertical product differentiation theory is applied to study if there is a price difference between contracts with guaranteed renewable electricity and contracts with no such guarantee. This is studied by running an Ordinary Least Squares regression with the control variables market share, bidding area and pricing structure. A significant price difference is found, where contracts with guaranteed renewable electricity are estimated to cost 1.175 öre more per kWh than other contracts. For a typical household, this means that switching to a contract with renewable electricity is estimated to increase the yearly electricity costs by 235 Swedish kronor.