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Residential rooftop solar demand in the U.S. and the impact of net energy metering and electricity prices

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  • Ros, Agustin J.
  • Sai, Sai Shetty

Abstract

We use a panel dataset of residential rooftop solar adoption for 27 states from 2008 to 2018 to estimate demand for rooftop solar and the impact of net energy metering compensation. We find demand is highly price elastic and that income is elastic as well. We find a large cross-price effect with respect to residential electricity price indicating that rooftop solar is a strong substitute for utility-provided electricity driven, in part, by poor residential rate design that primarily recovers fixed system costs through volumetric charges. We find that net energy metering has a large positive impact on the demand for residential rooftop solar, resulting in at least a doubling of demand and in uneconomic customer bypass of utility-supplied electricity, as net energy metering is not a market-based compensation rate. Our analysis lends support to ongoing state policy efforts to reform net energy metering and to improve electricity rate design.

Suggested Citation

  • Ros, Agustin J. & Sai, Sai Shetty, 2023. "Residential rooftop solar demand in the U.S. and the impact of net energy metering and electricity prices," Energy Economics, Elsevier, vol. 118(C).
    • Handle: RePEc:eee:eneeco:v:118:y:2023:i:c:s014098832200620x
    DOI: 10.1016/j.eneco.2022.106491
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    References listed on IDEAS

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    1. Bao, Qifang & Sinitskaya, Ekaterina & Gomez, Kelley J. & MacDonald, Erin F. & Yang, Maria C., 2020. "A human-centered design approach to evaluating factors in residential solar PV adoption: A survey of homeowners in California and Massachusetts," Renewable Energy, Elsevier, vol. 151(C), pages 503-513.
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    Citations

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    Cited by:

    1. Yang, Shubo & Jahanger, Atif & Awan, Ashar, 2024. "Temperature variation and urban electricity consumption in China: Implications for demand management and planning," Utilities Policy, Elsevier, vol. 90(C).
    2. repec:ags:aaea22:343883 is not listed on IDEAS
    3. Aquila, Giancarlo & Rotella Junior, Paulo & Rocha, Luiz Célio Souza & Balestrassi, Pedro Paulo & Pamplona, Edson de Oliveira & Nakamura, Wilson Toshiro, 2024. "Net metering rolling credits vs. net billing buyback: An economic analysis of a policy option proposal for photovoltaic prosumers," Renewable Energy, Elsevier, vol. 232(C).
    4. Belligoni, Sara & Trader, Elizabeth & Li, Mengjie & Rahman, Mohammad Siddiqur & Ali, Javed & Enriquez, Alejandra Rodriguez & Nagaraj, Meghana & Aksha, Sanam K. & Stevens, Kelly A. & Wahl, Thomas & Emr, 2025. "Transdisciplinary research promoting clean and resilient energy systems for socially vulnerable communities: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 213(C).
    5. Bakhtavoryan, Rafael & Hovhannisyan, Vardges & Woerman, Matt, 2025. "Residential demand for energy in light of changing solar prices," Energy Economics, Elsevier, vol. 144(C).
    6. Leanne Cass & Misato Sato & Aurelien Saussay, 2025. "Adoption, incidence and welfare impacts of interest-free loans: evidence from solar PV," CEP Discussion Papers dp2139, Centre for Economic Performance, LSE.
    7. López Prol, Javier & Paul, Arijit, 2024. "Profitability landscapes for competitive photovoltaic self-consumption," Energy Policy, Elsevier, vol. 188(C).
    8. Umme Mumtahina & Sanath Alahakoon & Peter Wolfs, 2025. "A Day-Ahead Optimal Battery Scheduling Considering the Grid Stability of Distribution Feeders," Energies, MDPI, vol. 18(5), pages 1-20, February.
    9. Falk, Martin Thomas & Hagsten, Eva, 2025. "The impact of rising electricity prices on demand for photovoltaic solar systems," Energy Economics, Elsevier, vol. 147(C).
    10. Pereira, Rui & O'Connell, Timmy, 2025. "The “pink tax” for solar panels: Financial returns on solar investments by gender in Los Angeles, California," Energy Economics, Elsevier, vol. 147(C).
    11. Bakhtavoryan, Rafael & Hovhannisyan, Vardges, 2024. "Residential demand for energy in light of changing solar prices," 2024 Annual Meeting, July 28-30, New Orleans, LA 343883, Agricultural and Applied Economics Association.

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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