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Solar rebound: The unintended consequences of subsidies

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  • Boccard, Nicolas
  • Gautier, Axel

Abstract

Many jurisdictions use net metering to record power exchanges between residential solar photovoltaic (PV) panels and the grid, thus valuing solar power at the electricity retail rate. However, if over the billing period, production exceeds consumption, the surplus remains freely available for consumption. In Wallonia (Belgium), the combination of net metering and generous subsidies for rooftop PV installation encouraged households to set-up large systems, possibly exceeding their consumption needs. We test this potential rebound effect with a large sample of residential PV installations. We observe that a large proportion of households oversize their installation to benefit from the subsidies and, later consume most of their excess production. The effect is econometrically highly significant. There is thus evidence of a strong increase in energy consumption by residential PV owners, which runs counter to the original policy design.

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  • Boccard, Nicolas & Gautier, Axel, 2021. "Solar rebound: The unintended consequences of subsidies," Energy Economics, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:eneeco:v:100:y:2021:i:c:s0140988321002401
    DOI: 10.1016/j.eneco.2021.105334
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    3. Edgar Valenzuela & Hector Campbell & Gisela Montero & Marcos A. Coronado & Alejandro A. Lambert-Arista & Carlos Perez-Tello & Víctor H. Ramos-Sanchez, 2021. "Evaluation of Home Energy Efficiency Improvements in a Hot Desert Climate in Northwestern Mexico: The Energy Saving vs. Money Saving Conflict," Energies, MDPI, vol. 14(23), pages 1-9, November.
    4. Aydın, Erdal & Brounen, Dirk & Ergün, Ahmet, 2023. "The rebound effect of solar panel adoption: Evidence from Dutch households," Energy Economics, Elsevier, vol. 120(C).
    5. Syed Hasan & Odmaa Narantungalag, & Martin Berka, 2022. "The intended and unintended consequences of large electricity subsidies: evidence from Mongolia," Discussion Papers 2202, School of Economics and Finance, Massey University, New Zealand.
    6. De Groote, Olivier & Gautier, Axel & Verboven, Frank, 2024. "The political economy of financing climate policy — Evidence from the solar PV subsidy programs," Resource and Energy Economics, Elsevier, vol. 77(C).
    7. Fikru, Mahelet G. & Gautier, Luis, 2023. "Consumption and production of cleaner energy by prosumers," Energy Economics, Elsevier, vol. 124(C).
    8. Hancevic, Pedro I. & Sandoval, Hector H., 2023. "Solar panel adoption among Mexican small and medium-sized commercial and service businesses," Energy Economics, Elsevier, vol. 126(C).
    9. Pedro I. Hancevic & Hector H. Sandoval, 2023. "Solar Panel Adoption in SMEs in Emerging Countries," Working Papers 222, Red Nacional de Investigadores en Economía (RedNIE).
    10. Liu, Diyi & Zou, Hongyang & Qiu, Yueming & Du, Huibin, 2024. "Consumer reaction to green subsidy phase-out in China: Evidence from the household photovoltaic industry," Energy Economics, Elsevier, vol. 129(C).
    11. Ross C. Beppler & Daniel C. Matisoff & Matthew E. Oliver, 2023. "Electricity consumption changes following solar adoption: Testing for a solar rebound," Economic Inquiry, Western Economic Association International, vol. 61(1), pages 58-81, January.
    12. Malek Al-Chalabi, 2023. "Targeted and Tangential Effects—A Novel Framework for Energy Research and Practitioners," Sustainability, MDPI, vol. 15(17), pages 1-12, August.
    13. Francesco Pietro Colelli & Enrica De Cian & Wilmer Pasut & Lucia Piazza, 2023. "Toward Net Zero in the midst of the energy and climate crises: the response of residential photovoltaic systems," Working Papers 2023:18, Department of Economics, University of Venice "Ca' Foscari".
    14. Jiang, Hou & Yao, Ling & Lu, Ning & Qin, Jun & Zhang, Xiaotong & Liu, Tang & Zhang, Xingxing & Zhou, Chenghu, 2024. "Exploring the optimization of rooftop photovoltaic scale and spatial layout under curtailment constraints," Energy, Elsevier, vol. 293(C).
    15. Gunkel, Philipp Andreas & Kachirayil, Febin & Bergaentzlé, Claire-Marie & McKenna, Russell & Keles, Dogan & Jacobsen, Henrik Klinge, 2023. "Uniform taxation of electricity: incentives for flexibility and cost redistribution among household categories," Energy Economics, Elsevier, vol. 127(PB).
    16. Van Opstal, Wim & Smeets, Anse, 2023. "When do circular business models resolve barriers to residential solar PV adoption? Evidence from survey data in flanders," Energy Policy, Elsevier, vol. 182(C).
    17. Frondel, Manuel & Kaestner, Kathrin & Sommer, Stephan & Vance, Colin, 2022. "Photovoltaics and the solar rebound: Evidence for Germany," Ruhr Economic Papers 954, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

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    More about this item

    Keywords

    Rebound effect; Solar PV; Net metering;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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