Household Responses to the Tax Treatment of Income from Solar PV Feed-in in Germany

FCN working papers

69 Pages Posted: 8 Dec 2023

See all articles by Jannik Fleiter

Jannik Fleiter

RWTH Aachen University

Ayse Tugba Atasoy

RWTH Aachen University - Institute for Future Energy Consumer Needs and Behavior (FCN)

Reinhard Madlener

RWTH Aachen University; Norwegian University of Science and Technology (NTNU) - Department of Industrial Economics and Technology Management

Date Written: August 1, 2023

Abstract

In this paper, we examine the significance of compliance costs in the context of solar photovoltaics deployment and installed capacity decisions by private households in Germany. We investigate possible adverse effects of feed-in remuneration schemes induced by tax compliance costs. More specifically, we study how private households respond to a tax policy instruction issued by the German Federal Ministry of Finance in June 2021, which enables to avoid the tax compliance obligations if the installed capacity does not exceed 10 kWp. A decision model and two different empirical models are employed to show how such compliance costs may distort both deployment decisions and capacity choices. We find that the tax instruction led to a change in the capacity distribution of newly built PV systems towards 50-65% intensified excess bunching slightly below 10 kWp, leading to inefficient use of rooftop space. Lack of cross-sectional variation in the data and a large number of confounding events in the observation period calls for further research to corroborate our findings.

Keywords: Feed-in tariff; Prosumer household; Solar photovoltaics; Compliance cost; Attribute-based regulation; Bunching; Regression discontinuity (in time) approach; Germany

JEL Classification: C14, D12, O33, Q42, Q48

Suggested Citation

Fleiter, Jannik and Atasoy, Ayse Tugba and Madlener, Reinhard, Household Responses to the Tax Treatment of Income from Solar PV Feed-in in Germany (August 1, 2023). FCN working papers , Available at SSRN: https://ssrn.com/abstract=4650278 or http://dx.doi.org/10.2139/ssrn.4650278

Jannik Fleiter

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056
Germany

Ayse Tugba Atasoy

RWTH Aachen University - Institute for Future Energy Consumer Needs and Behavior (FCN) ( email )

Mathieustrasse 6
Aachen, 52074
Germany

Norwegian University of Science and Technology (NTNU) - Department of Industrial Economics and Technology Management ( email )

HOME PAGE: http://https://www.ntnu.edu/employees/reinhard.madlener

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