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Microeconomics of the Solar Rebound Under Net Metering

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  • Matthew E. Oliver
  • Juan Moreno-Cruz
  • Kenneth T. Gillingham

Abstract

Residential solar photovoltaics generate “green” electricity but may also lead to an increase in household electricity consumption—a phenomenon termed the “solar rebound effect.” This study develops a theoretical framework for understanding the solar rebound. We show that the solar rebound is inherently linked to the net-metering compensation a household faces. While the solar rebound is often simply a pure income effect, it can also include a substitution effect in some policy contexts. A negative solar rebound is even possible. We derive the welfare effects of the solar rebound and provide insights for econometric estimation.

Suggested Citation

  • Matthew E. Oliver & Juan Moreno-Cruz & Kenneth T. Gillingham, 2025. "Microeconomics of the Solar Rebound Under Net Metering," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 12(5), pages 1317-1353.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/733484
    DOI: 10.1086/733484
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    Cited by:

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