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Residential rooftop solar demand in the U.S. and the impact of net energy metering and electricity prices

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  • Ros, Agustin J.
  • Sai, Sai Shetty

Abstract

We use a panel dataset of residential rooftop solar adoption for 27 states from 2008 to 2018 to estimate demand for rooftop solar and the impact of net energy metering compensation. We find demand is highly price elastic and that income is elastic as well. We find a large cross-price effect with respect to residential electricity price indicating that rooftop solar is a strong substitute for utility-provided electricity driven, in part, by poor residential rate design that primarily recovers fixed system costs through volumetric charges. We find that net energy metering has a large positive impact on the demand for residential rooftop solar, resulting in at least a doubling of demand and in uneconomic customer bypass of utility-supplied electricity, as net energy metering is not a market-based compensation rate. Our analysis lends support to ongoing state policy efforts to reform net energy metering and to improve electricity rate design.

Suggested Citation

  • Ros, Agustin J. & Sai, Sai Shetty, 2023. "Residential rooftop solar demand in the U.S. and the impact of net energy metering and electricity prices," Energy Economics, Elsevier, vol. 118(C).
    • Handle: RePEc:eee:eneeco:v:118:y:2023:i:c:s014098832200620x
    DOI: 10.1016/j.eneco.2022.106491
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    References listed on IDEAS

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    1. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    2. Kenneth Gillingham & Tsvetan Tsvetanov, 2019. "Hurdles and steps: Estimating demand for solar photovoltaics," Quantitative Economics, Econometric Society, vol. 10(1), pages 275-310, January.
    3. Marcello Graziano & Kenneth Gillingham, 2015. "Spatial patterns of solar photovoltaic system adoption: The influence of neighbors and the built environment," Journal of Economic Geography, Oxford University Press, vol. 15(4), pages 815-839.
    4. Bao, Qifang & Sinitskaya, Ekaterina & Gomez, Kelley J. & MacDonald, Erin F. & Yang, Maria C., 2020. "A human-centered design approach to evaluating factors in residential solar PV adoption: A survey of homeowners in California and Massachusetts," Renewable Energy, Elsevier, vol. 151(C), pages 503-513.
    5. Dong, Changgui & Sigrin, Benjamin & Brinkman, Gregory, 2017. "Forecasting residential solar photovoltaic deployment in California," Technological Forecasting and Social Change, Elsevier, vol. 117(C), pages 251-265.
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    Cited by:

    1. Bakhtavoryan, Rafael & Hovhannisyan, Vardges, 2024. "Residential demand for energy in light of changing solar prices," 2024 Annual Meeting, July 28-30, New Orleans, LA 343883, Agricultural and Applied Economics Association.
    2. López Prol, Javier & Paul, Arijit, 2024. "Profitability landscapes for competitive photovoltaic self-consumption," Energy Policy, Elsevier, vol. 188(C).

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    More about this item

    Keywords

    Electricity demand; Rooftop solar; Econometrics; Net energy metering;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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