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Solar rebound: the unintended consequences of subsidies

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  • BOCCARD Nicolas,

    (Universitat de Girona)

  • GAUTIER Axel,

    (Université de Liège, CORE and CESifo)

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.

Suggested Citation

  • BOCCARD Nicolas, & GAUTIER Axel,, 2020. "Solar rebound: the unintended consequences of subsidies," LIDAM Discussion Papers CORE 2020002, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2020002
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    Cited by:

    1. Syed Hasan & Odmaa Narantungalag, & Martin Berka, 2022. "The intended and unintended consequences of large electricity subsidies: evidence from Mongolia," Discussion Papers 2202, School of Economics and Finance, Massey University, New Zealand.
    2. Hindriks, Jean & Serse, Valerio, 2022. "The incidence of VAT reforms in electricity markets: Evidence from Belgium," International Journal of Industrial Organization, Elsevier, vol. 80(C).
    3. Wim Van Opstal & Anse Smeets, 2022. "Market-Specific Barriers and Enablers for Organizational Investments in Solar PV—Lessons from Flanders," Sustainability, MDPI, vol. 14(20), pages 1-26, October.
    4. Ross C. Beppler & Daniel C. Matisoff & Matthew E. Oliver, 2023. "Electricity consumption changes following solar adoption: Testing for a solar rebound," Economic Inquiry, Western Economic Association International, vol. 61(1), pages 58-81, January.
    5. Fikru, Mahelet G. & Gautier, Luis, 2023. "Consumption and production of cleaner energy by prosumers," Energy Economics, Elsevier, vol. 124(C).
    6. Van Opstal, Wim & Smeets, Anse, 2023. "When do circular business models resolve barriers to residential solar PV adoption? Evidence from survey data in flanders," Energy Policy, Elsevier, vol. 182(C).
    7. Malek Al-Chalabi, 2023. "Targeted and Tangential Effects—A Novel Framework for Energy Research and Practitioners," Sustainability, MDPI, vol. 15(17), pages 1-12, August.
    8. Edgar Valenzuela & Hector Campbell & Gisela Montero & Marcos A. Coronado & Alejandro A. Lambert-Arista & Carlos Perez-Tello & Víctor H. Ramos-Sanchez, 2021. "Evaluation of Home Energy Efficiency Improvements in a Hot Desert Climate in Northwestern Mexico: The Energy Saving vs. Money Saving Conflict," Energies, MDPI, vol. 14(23), pages 1-9, November.
    9. Frondel, Manuel & Kaestner, Kathrin & Sommer, Stephan & Vance, Colin, 2022. "Photovoltaics and the solar rebound: Evidence for Germany," Ruhr Economic Papers 954, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    10. Aydın, Erdal & Brounen, Dirk & Ergün, Ahmet, 2023. "The rebound effect of solar panel adoption: Evidence from Dutch households," Energy Economics, Elsevier, vol. 120(C).
    11. Gunkel, Philipp Andreas & Kachirayil, Febin & Bergaentzlé, Claire-Marie & McKenna, Russell & Keles, Dogan & Jacobsen, Henrik Klinge, 2023. "Uniform taxation of electricity: incentives for flexibility and cost redistribution among household categories," Energy Economics, Elsevier, vol. 127(PB).
    12. Pedro I. Hancevic & Hector H. Sandoval, 2023. "Solar Panel Adoption in SMEs in Emerging Countries," Working Papers 222, Red Nacional de Investigadores en Economía (RedNIE).
    13. Francesco Pietro Colelli & Enrica De Cian & Wilmer Pasut & Lucia Piazza, 2023. "Toward Net Zero in the midst of the energy and climate crises: the response of residential photovoltaic systems," Working Papers 2023:18, Department of Economics, University of Venice "Ca' Foscari".

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    More about this item

    Keywords

    rebound effect; solar PV; net metering;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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