Determinants for the adoption of green electricity by German SMEs – An empirical examination

Abstract

In Germany, the substitution of green electricity (GE) from renewable energy sources for nuclear and fossil electricity is politically intended, yet the demand for GE remains limited. This article provides empirical insight into factors influencing the decision of German small- and medium-sized enterprises (SMEs) to adopt GE. Potentially relevant factors are identified through a review of the previous literature and investigated using logit model analyses based on a large-scale survey of German SMEs regarding GE adoption. We find that German SME decision-makers who have consciously decided to adopt GE characteristically have a high level of perceived environmental responsibility. The results also show that an SME's decision to adopt GE is influenced by decision-makers' perceptions of the sustainability, continual availability and price premium of GE. While investigating firms' characteristics, we found evidence that the likelihood of adoption is increased in microenterprises that have displayed pro-environmental behavior (other than GE adoption) in the past. Further, in considering an SME's sales market, customer appreciation of GE is a central determinant of adoption. Finally, our findings suggest that firms' lack of knowledge contributes to the low level of GE adoption. Using our findings, we provide research-based policy recommendations at the end of this paper.