Customer Interest in Circular Solar Business Models: Who has Trust Issues?

Saskia Manshoven^1,*, Wim Van Opstal¹

¹VITO (Vlaamse Instelling voor Technologisch Onderzoek), Boeretang 200, B- 2400 Mol, Belgium

* [email protected]

Extended abstract

Recent global crises related to Covid-19 and the war in Ukraine increased public awareness of the risks of market volatility and uncertainty of supply of raw materials, product components, and energy (Borms et al., 2023). The recent increase in energy prices caused by the war in Ukraine, has rushed governments to secure alternative energy supplies, reconsider their energy mix and strive for more energy efficiency. A key question is whether this crisis holds the opportunity to give a boost to the transition towards cleaner energy sources, or whether it will be a drawback (IEA, 2022). Many countries have targeted policies to support the development of renewable energy. However, since such developments often involve high upfront investment costs and new waste streams, there is a general interest in looking for new and circular business models to support the transition (Van Opstal and Smeets, 2023).

While it is increasingly acknowledged that circular business models can contribute to alleviating resource supply constraints and avoiding waste generation, these new models are often looked at with some suspicion. On the one hand, circular business models are believed to attract environmentally conscious customer segments, even willing to pay a circular premium for sustainably produced goods (D’Adamo and Lupi, 2021). On the other hand, most studies indicate that starting a circular business model is not straightforward since customers are not automatically convinced of circular value propositions (Boyer et al., 2021). Moreover, engaging in new business models requires trust in manufacturers and service suppliers, regulations, and technologies (Guldmann and Huulgaard, 2020). This need for trust is enhanced by the fact that legal frameworks and markets are often incomplete at the time new business models are introduced (Linder and Williander, 2017). Therefore, role positions, warranties, responsibilities, and liabilities are not always very clear in the mindset of prospective customers. However, as in any societal transition, the participation of the wider public in general, and customer acceptance in particular, is a necessary condition to succeed (Elzinga et al., 2020).

In this paper, we use empirical data from a large-scale survey in Flanders (Belgium) to investigate the relationship between institutional trust and the willingness of customers to engage in circular business models related to solar photovoltaics (PV), including Product Service Systems (PSS) and PV reuse. We consider solar PV as a relevant case for this study, since it involves high upfront investment costs, a risk of lock-in with respect to contractual regulations and government policies, and a risk of technological obsolescence.  Flanders is a region in which solar PV uptake is high within traditional sales models, but where solar circular business models are considered to be very new and unknown (Van Opstal and Smeets, 2023). Moreover, PV policy in this region has been prone to multiple significant and unexpected shifts, resulting in a lack of legal certainty during the last decade (Van Opstal and Smeets, 2022). We focus on a residential market segment, capturing the decision-making process in business-to-consumer markets in which emotional elements (in addition to cognitive arguments) are believed to play a bigger role than in business-to-business markets (Kemp et al., 2018).

The survey data (n = 3,996) capture preferences and value propositions for solar circular business models expressed by residential respondents (1) with no solar PV, (2) who own solar PV, and (3) who use solar PV as-a-service. We control for personal and housing characteristics, and institutional trust parameters. Personal characteristics include covariates such as gender, age, migration background, activity status, educational attainment, household size, and net monthly household income. To capture previous experiences with as-a-service models, we included questions on experiences with Netflix, Spotify, or car lease. We also used a proxy for risk aversion and asked whether respondents were a member of a renewable energy citizen cooperative (Huybrechts and Mertens, 2014). To capture housing characteristics, we asked questions about ownership status, housing type, the number of building layers, construction year, roof type, and roof quality. We also asked the ZIP code, enabling us to identify whether respondents live in a city or not, and complemented this with a question whether respondents consider themselves living in an urban, a semi-urban, or a rural area.

Institutional trust parameters were gathered on governments, service providers, technology, nuclear energy, and the green political party. The latter trust parameter is included as a proxy for environmental preferences, in line with earlier research in Sweden (Palm, 2020). We complement these data with a semantic analysis of remarks that were given in open comment fields throughout the survey, using a combination of deductive and inductive coding (Skjott Linneberg and Korsgaard, 2019). We apply NLP techniques and sentiment analysis to capture cognitive thoughts and reflections on the one hand, and verbal expressions of sentiments and emotions on the other hand (Kumar et al., 2020). These results are translated into covariates in an econometric analysis of the degree upon which trust parameters, expressed in cognitive arguments or in emotional expressions, affect the propensity to engage in circular business models.

This approach allows us to answer the following research questions:

-        RQ 1: What is the impact of institutional (dis)trust on the propensity of citizens to engage in the adoption of circular business models?

-        RQ 2: Which consumer groups are most prone to trust issues when adopting circular business models, taking into account demographic and economic profile differences?

-        RQ 3: What is the interaction between cognitive and emotional arguments related to trust in the decision-making process to adapt circular business models?

Initial results show the importance of trust in as-a-service providers and technology, and the complex relationship between trust in governments and solar PV investments. We recommend policymakers to invest in legal complementarity and legal certainty, enabling households to regain trust to adopt new and sustainable technologies, and identify novel research gaps. Finally, and foremost we identify lessons to build more resilient business models that take into account the importance of institutional trust. 

Keywords 

circular business models, circular economy, sentiment analysis, survey research, institutional trust, renewable energy 

References 

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