Using Income Contingent Loans for the Financing of the Next Million Australian Solar Rooftops

Abstract

Rooftop solar systems have two major benefits: a reduction of carbon emissions (a public good) and future energy bill savings for consumers. However, the availability of solar energy systems to low-income households is constrained by access to finance for the initial investment cost, an issue which could potentially be addressed with the use of income contingent loans (ICLs). By applying unconditional quantile econometric methods to HILDA income data we illustrate that for a $10,000 loan for home owners ICLs can be used with little or no cost to government to help finance the next one million solar energy devices.

Keywords: Income contingent loans; solar energy

JEL Classification: Q28, Q27