Willingness-to-Pay for Energy Conservation and Free-Ridership on Subsidization – Evidence from Germany



conditions. The term ep 1 is the efficiency factor of the heating equipment and
converts final energy demand (such as energy for space heating) into primary
energy demand.
QH is determined by dwelling size and the insulation quality
of the building’s envelope. The better the insulation, the less heat is lossed due
to transmission through the building’s envelope. The total heat loss
HT of a
building, measured in Watts per year, is computed as:

(12)                     HT =(Ur + 0.05) * Ar,

r

with Ar describing the surface in m2 of a certain component r of the building’s
envelope. The so-called ”U-Value” expresses the heat loss of the component in
watts per m
2 , given a difference of 1 Kelvin between indoor and outdoor temper-
ature.
11 The smaller the U-Value, the better the insulation, and the smaller the
heat loss and the energy demand for space heating.

Roof and facade insulation as well as window replacement alter HT by lowering
the U-Value of a specific component, and hence reduce
QH and Q. An efficiency
improvement of the heating equipment lowers
ep. Thus, energy savings ∆Q are
computed as the difference in the building’s annual primary energy demand in
response to changes in
HT and ep :

∂Q ∂Qh     QQ

( )                ∆Q  ∂Qh ∂HT dHT + ∂ep dep.

Because we lack data on exact U-values and efficiency factors ep of the buildings
in our sample, we use typically applicable figures by construction year, reported
in Table 4.

4.2 Cost

Turning to the measurement of costs for each retrofit measure, we use a Geo-
graphic Information System (GIS) to calculate a cost-variable that draws on two

11Thermal bridges in the component are incorporated by adding 0.05 W per m2.

27



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