Individual Heating systems vs. District Heating systems: What will consumers pay for convenience?

For Korea's two most popular apartment heating systems – Individual Heating (IH) and District Heating (DH), – user convenience rests heavily on location of the boiler, availability of hot water, administration of the system, and user control of indoor temperature. A double-bounded dichotomous choice method estimates consumer value for convenience, in a hypothetical market. Higher-income more-educated consumers in more expensive apartments prefer DH. Cost-conscious consumers, who use more electrical heating appliances and more actively adjust separate room temperatures, prefer IH. With willingness-to-pay (WTP) defined as the price ratio between IH and DH, 800 survey respondents indicate a WTP of 4.0% for DH over IH. IH users unfamiliar with DH expect little greater convenience (0.1% WTP), whereas the WTP for DH users runs to 7.9%, demonstrating consumer loyalty. Quantified estimates of consumer preference and convenience can inform design of a full-cost-plus pricing system with a price cap. Results here indirectly predict the effect of abolishing regulations that exclusively establish district heating zones. Strategies to foster the many external benefits of DH systems should stress not their lower cost, but convenience, comfort, and safety. Higher installation costs still hamper DH expansion, so policy-makers could set policies to lower cost barriers to entry. - Highlights: • District Heating (DH) and Individual Heating (IH) systems differ in user convenience. • Difference of convenience is evaluated by a double-bounded dichotomous choice method. • Consumers are willing to pay a 4.03–12.52% higher rate to use DH rather than IH. • Consumers with high living standards prefer DH to IH, and show high consumer loyalty. • Strategies to foster DH systems should stress DH convenience over its lower cost.