Price signals and distributed solar adoption under net metering: Evidence from Brazil

This paper examines residential rooftop photovoltaic adoption in Brazil and the role of electricity tariffs and their internal components under a net energy metering framework. Using a panel dataset covering 5570 municipalities over the period 2012–2021, the study estimates Poisson pseudo-maximum likelihood models with municipality and year fixed effects to account for zero outcomes and unobserved heterogeneity. The results show that residential PV adoption is highly responsive to electricity prices: a one BRL cent per kWh increase in the final retail electricity tariff is associated with an increase of approximately 6%–8% in the number of newly installed rooftop PV systems, holding other factors constant. In addition, tariff composition matters, as a higher share of the energy component in the final tariff is associated with greater PV adoption. These findings indicate that regulated volumetric tariff structures generate strong incentives for households to invest in self-generation as a hedge against rising retail electricity prices. The paper provides new empirical evidence on price signals and distributed generation in an emerging electricity market and highlights the importance of tariff design for shaping the pace and distribution of residential PV diffusion.