IDEAS home Printed from https://ideas.repec.org/p/ags/aaea25/361167.html

Shining a Light on Risk: Risk Preferences and Adoption Decisions of Residential Solar PV

Author

Listed:
  • Rong, Rong
  • Crago, Christine L.
  • Wang, Rui

Abstract

Individuals making a decision about whether to adopt rooftop solar PV technology face significant financial risk, including technology underperformance, unexpected maintenance and repairs, and changes in policy regarding solar PV incentives. The presence of risk as a factor in the adoption decision suggests that individuals with a higher level of risk tolerance are more likely to adopt the technology than those who are risk averse. In addition, early adopters are also more likely to be risk-tolerant than late adopters. In this paper, we use a lab-in-the-field experiment to elicit individual risk preferences from a subject pool of solar PV adopters and non-adopters, and use this data to examine the effect of risk preference on the decision to adopt solar PV. Our findings confirm our hypothesis that risk preference plays a crucial role in determining solar PV adoption status and the timing of adoption. Our findings suggest that reducing risk in the solar market through policy or through risk-mitigating insurance products can help to broaden solar PV adoption among households.

Suggested Citation

  • Rong, Rong & Crago, Christine L. & Wang, Rui, 2025. "Shining a Light on Risk: Risk Preferences and Adoption Decisions of Residential Solar PV," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 361167, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea25:361167
    DOI: 10.22004/ag.econ.361167
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/361167/files/95454_95475_105300_Rong_et_al_solar_risk_AAEA2025.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.361167?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Peter A. F. Fraser‐Mackenzie & Tiejun Ma & Ming‐Chien Sung & Johnnie E. V. Johnson, 2019. "Let's Call it Quits: Break‐Even Effects in the Decision to Stop Taking Risks," Risk Analysis, John Wiley & Sons, vol. 39(7), pages 1560-1581, July.
    2. repec:bla:econom:v:65:y:1998:i:260:p:581-98 is not listed on IDEAS
    3. Qiu, Yueming & Colson, Gregory & Grebitus, Carola, 2014. "Risk preferences and purchase of energy-efficient technologies in the residential sector," Ecological Economics, Elsevier, vol. 107(C), pages 216-229.
    4. Bauner, Christoph & Crago, Christine L., 2015. "Adoption of residential solar power under uncertainty: Implications for renewable energy incentives," Energy Policy, Elsevier, vol. 86(C), pages 27-35.
    5. James Cox & Vjollca Sadiraj & Ulrich Schmidt, 2015. "Paradoxes and mechanisms for choice under risk," Experimental Economics, Springer;Economic Science Association, vol. 18(2), pages 215-250, June.
    6. Graham Loomes & Robert Sugden, 1998. "Testing Different Stochastic Specificationsof Risky Choice," Economica, London School of Economics and Political Science, vol. 65(260), pages 581-598, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bernedo Del Carpio, María & Alpizar, Francisco & Ferraro, Paul J., 2022. "Time and risk preferences of individuals, married couples and unrelated pairs," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 97(C).
    2. Christine L. Crago & Rong Rong, 2025. "Behavioral preferences and contract choice in the residential solar PV market," American Journal of Agricultural Economics, John Wiley & Sons, vol. 107(1), pages 27-53, January.
    3. Nathaniel T. Wilcox, 2024. "Conditional independence in a binary choice experiment," Journal of Risk and Uncertainty, Springer, vol. 68(3), pages 205-225, June.
    4. Tian, Ye & Chiu, Yi-Chang & Sun, Jian, 2019. "Understanding behavioral effects of tradable mobility credit scheme: An experimental economics approach," Transport Policy, Elsevier, vol. 81(C), pages 1-11.
    5. Vrînceanu, Alexandra & Dumitrașcu, Monica & Kucsicsa, Gheorghe, 2022. "Site suitability for photovoltaic farms and current investment in Romania," Renewable Energy, Elsevier, vol. 187(C), pages 320-330.
    6. M. Vittoria Levati & Aaron Nicholas & Birendra Rai, 2011. "Testing the Analytical Framework of Other-Regarding Preferences," Monash Economics Working Papers 26-11, Monash University, Department of Economics.
    7. Schleich, Joachim & Faure, Corinne & Guetlein, Marie-Charlotte & Tu, Gengyang, 2020. "Conveyance, envy, and homeowner choice of appliances," Energy Economics, Elsevier, vol. 89(C).
    8. Fischbacher, Urs & Schudy, Simeon & Teyssier, Sabrina, 2021. "Heterogeneous preferences and investments in energy saving measures," Resource and Energy Economics, Elsevier, vol. 63(C).
    9. Harrison, Glenn W. & Martínez-Correa, Jimmy & Swarthout, J. Todd, 2013. "Inducing risk neutral preferences with binary lotteries: A reconsideration," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 145-159.
    10. Aldo Gutiérrez Mendieta, 2016. "Determinantes de consumo eficiente de energía eléctrica en el sector residencial en México: un enfoque de regresión cuantílica," Graduate theses (Spanish) TESG 010, CIDE, División de Economía.
    11. Calabuig, Vicente & Fatas, Enrique & Olcina, Gonzalo & Rodriguez-Lara, Ismael, 2016. "Carry a big stick, or no stick at all," Journal of Economic Psychology, Elsevier, vol. 57(C), pages 153-171.
    12. Jihyo Kim & Suhyeon Nam, 2021. "Do Household Time, Risk, and Social Preferences Affect Home Energy Retrofit Decisions in Korea?," Sustainability, MDPI, vol. 13(8), pages 1-18, April.
    13. Belaïd, Fateh & Ranjbar, Zeinab & Massié, Camille, 2021. "Exploring the cost-effectiveness of energy efficiency implementation measures in the residential sector," Energy Policy, Elsevier, vol. 150(C).
    14. Carlos Alós-Ferrer & Georg D. Granic, 2023. "Does choice change preferences? An incentivized test of the mere choice effect," Experimental Economics, Springer;Economic Science Association, vol. 26(3), pages 499-521, July.
    15. Yaron Azrieli & Christopher P. Chambers & Paul J. Healy, 2020. "Incentives in experiments with objective lotteries," Experimental Economics, Springer;Economic Science Association, vol. 23(1), pages 1-29, March.
    16. Ma, T. & Fraser-Mackenzie, P.A.F. & Sung, M. & Kansara, A.P. & Johnson, J.E.V., 2022. "Are the least successful traders those most likely to exit the market? A survival analysis contribution to the efficient market debate," European Journal of Operational Research, Elsevier, vol. 299(1), pages 330-345.
    17. Klein, Martin & Deissenroth, Marc, 2017. "When do households invest in solar photovoltaics? An application of prospect theory," Energy Policy, Elsevier, vol. 109(C), pages 270-278.
    18. Faure, Corinne & Schleich, Joachim, 2020. "Poor energy ratings when appliances convey?," Energy Policy, Elsevier, vol. 139(C).
    19. Samdruk Dharshing & Stefanie Lena Hille, 2017. "The Energy Paradox Revisited: Analyzing the Role of Individual Differences and Framing Effects in Information Perception," Journal of Consumer Policy, Springer, vol. 40(4), pages 485-508, December.
    20. Jia, Jun-Jun & Xu, Jin-Hua & Fan, Ying & Ji, Qiang, 2018. "Willingness to accept energy-saving measures and adoption barriers in the residential sector: An empirical analysis in Beijing, China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 95(C), pages 56-73.

    More about this item

    Keywords

    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea25:361167. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.