The Effectiveness of Future Financial Benefits on Pv Adoption - Evidence from Belgium

Abstract

We assess the effect of different incentive schemes with future financial benefits on photovoltaic (PV) adoption patterns in the residential sector for the two biggest regions of Belgium - Flanders and Wallonia. Due to variation in incentive schemes across the regions and within regions across months, we can identify the effect of changes in future benefits on adoption. We combine and compare three distinct and widely used incentive schemes for PV, namely output-based, capacity-based and net metering, which is electricity cost saving-based. We find that PV adoption in the residential sector is highly sensitive to overall future financial benefits. A one percent increase in overall benefits per kW of installed capacity increases installation numbers by around 7%. However, the different incentive schemes have varying degrees of effectiveness. Capacity- and output-based incentive schemes, which directly compensate households with a fixed price per produced amount of electric energy or per installed capacity annually are at least 60% more effective in fostering PV uptake than the cost saving-based net metering, which depends on future electricity prices and production. Furthermore, depending on whether additional capacity is compensated or not, the different incentive schemes either increase or decrease the average capacity of new installations.

Keywords: Solar PV investment, Renewable energy incentives, Future financial benefits