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Adoption, incidence and welfare impacts of interest-free loans: evidence from solar PV

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  • Leanne Cass
  • Misato Sato
  • Aurelien Saussay

Abstract

Steep declines in solar PV costs raises questions about whether, and how, to continue support. We leverage administrative microdata on the near-universe of UK domestic PV and a matched difference-in-differences design exploiting devolved UK policy to evaluate the zero-interest Home Energy Scotland loan. The loan increased household adoption even in a low solar-potential setting and shifted take-up towards smaller systems. Distributionally, gains were broad and not concentrated among high-income areas, and were relatively strong in urban and accessible rural locations, yielding a less skewed wealth distribution and geography of installations. A loan-specific marginal value of public funds shows welfare gains at modest fiscal cost via a consumption-smoothing, financing channel. Zero-interest loans can cost-effectively expand household PV while promoting equitable access.

Suggested Citation

  • 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.
    • Handle: RePEc:cep:cepdps:dp2139
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    Keywords

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    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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