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Subsidies and Time Discounting in New Technology Adoption: Evidence from Solar Photovoltaic Systems

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  • De Groote, Olivier
  • Verboven, Frank

Abstract

We study a generous program to promote the adoption of solar photovoltaic (PV) systems through subsidies on future electricity production, rather than through upfront investment subsidies. We develop a tractable dynamic model of new technology adoption, also accounting for local market heterogeneity. We identify the discount factor from demand responses to variation that shifts expected future but not current utilities. Despite the massive adoption, we find that households significantly discounted the future benefits from the new technology. This implies that an upfront investment subsidy program would have promoted the technology at a much lower budgetary cost.

Suggested Citation

  • De Groote, Olivier & Verboven, Frank, 2018. "Subsidies and Time Discounting in New Technology Adoption: Evidence from Solar Photovoltaic Systems," TSE Working Papers 18-957, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:32966
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    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

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