When the carrot goes bad: The effect of solar rebate uncertainty

Although meant to encourage investment in solar photovoltaic (PV) systems, some incentive policies may themselves become a barrier in instances where policy-related uncertainty is present, as potential solar adopters delay their investment until uncertainty is resolved. This study utilizes a quasi-experimental setting to quantify the effect of solar policy uncertainty. Focusing on the California Solar Initiative's residential rebate program, I exploit the temporary exhaustion of funds within one of the utility territories as an exogenous source of increased uncertainty and estimate that it leads to a 67% drop in rebate applications in an average ZIP code-week. There is considerable heterogeneity in this effect depending on household income and PV system size. Among households that are least likely to invest in PV without a rebate incentive, program participation drops by up to 69%. This suggests potentially significant loss in program effectiveness due to lower PV adoption and underscores the importance of accounting for uncertainty in policy evaluations.