Understanding household switching behavior in the retail electricity market

• This paper investigates the barriers for electricity supplier switching in Denmark.
• Four switching barriers were identified.
• Relationship management and economic benefits are critical for consumer switching.
• Three consumer segments for electricity supplier switching were identified.

Deregulation of the Danish retail electricity market nearly a decade ago has produced little consumer switching among suppliers or renegotiation of supplier service contracts. From an energy policy perspective, a certain amount of supplier switching is an important indicator of the success of market deregulation. This argues that poor relationship management and a lack of economic benefits are two critical barriers to consumer switching. Latent class analysis indicates that only 11.4% of consumers are non-switchers, whereas 41.1% can be considered potential switchers and approximately one-half (47.5%) can be considered apathetic consumers. We also discuss the managerial implications for both electricity suppliers and policy makers.