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

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  • 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
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    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. 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.
    4. 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.
    5. 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.
    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)

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