Solar Rebound - The Unintended Consequences of Subsidies

30 Pages Posted: 6 Dec 2019

See all articles by Axel Gautier

Axel Gautier

University of Liege - Research Center on Public and Population Economics; Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Nicolas Boccard

University of Girona - Department of Economics

Date Written: 2019

Abstract

Many jurisdictions use net metering to record the power exchange between solar photovoltaic panels and the grid, thus valuing home production at the electricity retail rate. However, if over the billing period, production exceeds consumption, the surplus remains freely available for consumption. In Wallonia (Belgium), this system was combined with generous subsidies for solar panels that encouraged households to set-up large installations, possibly exceeding their consumption needs. In this context, we test for a possible rebound effect. Based on a large sample of residential PV installations, we observe that a large proportion of households oversized their installation to benefit from the subsidies and, later ended-up consuming most of their excess production. The effect is econometrically highly significant. There are thus evidence of a strong increase in energy consumption by residential PV owners, that runs counter the original policy design.

Keywords: rebound effect, solar PV, net metering

JEL Classification: C510, Q480, Q580, Q410, Q420

Suggested Citation

Gautier, Axel and Boccard, Nicolas, Solar Rebound - The Unintended Consequences of Subsidies (2019). CESifo Working Paper No. 7963. Available at SSRN: https://ssrn.com/abstract=3498720

Axel Gautier

University of Liege - Research Center on Public and Population Economics ( email )

Boulevard du Rectorat, 7, Batiment 31
Sart-Tilman
B-4000 Liege, 4000
Belgium

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium
+32-10-47.43.01 (Fax)

Nicolas Boccard (Contact Author)

University of Girona - Department of Economics ( email )

FCEE, Campus de Montilivi
Girona, 17071
Spain

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