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Weather and the Decision to Go Solar: Evidence on Costly Cancellations

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  • Yanjun Liao

Abstract

This paper studies the effect of short-run weather fluctuations on solar panel adoption in California. This decision appears to respond strongly to weather patterns associated with solar panel productivity: I find that customers whose sign-up for solar panels is followed by unfavorable weather are more likely to cancel their contracts. In contrast, nonresidential customers are not subject to the same effect. Together, these results suggest that short-run weather conditions affect customers’ valuation of solar panels. The most plausible mechanisms are psychological biases such as projection bias or a salience effect, leading the decision maker to rely too heavily on transient conditions when predicting long-run utility. This paper is among the earliest to document evidence of behavioral anomalies in the solar market.

Suggested Citation

  • Yanjun Liao, 2020. "Weather and the Decision to Go Solar: Evidence on Costly Cancellations," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(1), pages 1-33.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/705592
    DOI: 10.1086/705592
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    Cited by:

    1. Bonan, Jacopo & Cattaneo, Cristina & D'Adda, Giovanna & Tavoni, Massimo, 2023. "Daily Temperature and Sales of Energy-using Durables," RFF Working Paper Series 23-43, Resources for the Future.
    2. Stefan Lamp, 2023. "Sunspots That Matter: The Effect of Weather on Solar Technology Adoption," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(4), pages 1179-1219, April.
    3. Pan He & Pengfei Liu & Yueming (Lucy) Qiu & Lufan Liu, 2022. "The weather affects air conditioner purchases to fill the energy efficiency gap," Nature Communications, Nature, vol. 13(1), pages 1-8, December.
    4. Clot, Sophie & Grolleau, Gilles & Ibanez, Lisette, 2022. "Projection bias in environmental beliefs and behavioural intentions - An application to solar panels and eco-friendly transport," Energy Policy, Elsevier, vol. 160(C).
    5. Cook, Jeffrey J. & Cruce, Jesse & O'Shaughnessy, Eric & Ardani, Kristen & Margolis, Robert, 2021. "Exploring the link between project delays and cancelation rates in the U.S. rooftop solar industry," Energy Policy, Elsevier, vol. 156(C).

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