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Solar rebound: the unintended consequences of subsidies

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  • BOCCARD Nicolas,

    (Universitat de Girona)

  • GAUTIER Axel,

    (Université de Liège, CORE and CESifo)

Abstract

Many jurisdictions use net metering to record the power exchange between solar photovoltaic panels and the grid, thus valuing home production at the electricity retail rate. However, if over the billing period, production exceeds consumption, the surplus remains freely available for consumption. In Wallonia (Belgium), this system was combined with generous subsidies for solar panels that encouraged households to set-up large installations, possibly exceeding their consumption needs. In this context, we test for a possible rebound effect. Based on a large sample of residential PV installations, we observe that a large proportion of households oversized their installation to benefit from the subsidies and, later ended-up consuming most of their excess production. The effect is econometrically highly significant. There are thus evidence of a strong increase in energy consumption by residential PV owners, that runs counter the original policy design.

Suggested Citation

  • BOCCARD Nicolas, & GAUTIER Axel,, 2020. "Solar rebound: the unintended consequences of subsidies," LIDAM Discussion Papers CORE 2020002, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2020002
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    2. Hindriks, Jean & Serse, Valerio, 2022. "The incidence of VAT reforms in electricity markets: Evidence from Belgium," International Journal of Industrial Organization, Elsevier, vol. 80(C).
    3. Wim Van Opstal & Anse Smeets, 2022. "Market-Specific Barriers and Enablers for Organizational Investments in Solar PV—Lessons from Flanders," Sustainability, MDPI, vol. 14(20), pages 1-26, October.
    4. Edgar Valenzuela & Hector Campbell & Gisela Montero & Marcos A. Coronado & Alejandro A. Lambert-Arista & Carlos Perez-Tello & Víctor H. Ramos-Sanchez, 2021. "Evaluation of Home Energy Efficiency Improvements in a Hot Desert Climate in Northwestern Mexico: The Energy Saving vs. Money Saving Conflict," Energies, MDPI, vol. 14(23), pages 1-9, November.
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    12. De Groote, Olivier & Gautier, Axel & Verboven, Frank, 2024. "The political economy of financing climate policy — Evidence from the solar PV subsidy programs," Resource and Energy Economics, Elsevier, vol. 77(C).
    13. Pedro I. Hancevic & Hector H. Sandoval, 2023. "Solar Panel Adoption in SMEs in Emerging Countries," Working Papers 222, Red Nacional de Investigadores en Economía (RedNIE).
    14. Liu, Diyi & Zou, Hongyang & Qiu, Yueming & Du, Huibin, 2024. "Consumer reaction to green subsidy phase-out in China: Evidence from the household photovoltaic industry," Energy Economics, Elsevier, vol. 129(C).
    15. Ross C. Beppler & Daniel C. Matisoff & Matthew E. Oliver, 2023. "Electricity consumption changes following solar adoption: Testing for a solar rebound," Economic Inquiry, Western Economic Association International, vol. 61(1), pages 58-81, January.
    16. Malek Al-Chalabi, 2023. "Targeted and Tangential Effects—A Novel Framework for Energy Research and Practitioners," Sustainability, MDPI, vol. 15(17), pages 1-12, August.
    17. Böning, Justus & Bruninx, Kenneth & Ovaere, Marten & Pepermans, Guido & Delarue, Erik, 2025. "The effectiveness of future financial benefits on PV adoption — Evidence from Belgium," Energy Economics, Elsevier, vol. 142(C).
    18. 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.
    19. Francesco Pietro Colelli & Enrica De Cian & Wilmer Pasut & Lucia Piazza, 2023. "Toward Net Zero in the midst of the energy and climate crises: the response of residential photovoltaic systems," Working Papers 2023:18, Department of Economics, University of Venice "Ca' Foscari".
    20. Jiang, Hou & Yao, Ling & Lu, Ning & Qin, Jun & Zhang, Xiaotong & Liu, Tang & Zhang, Xingxing & Zhou, Chenghu, 2024. "Exploring the optimization of rooftop photovoltaic scale and spatial layout under curtailment constraints," Energy, Elsevier, vol. 293(C).
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    22. Tamás Orosz & Anton Rassõlkin & Pedro Arsénio & Peter Poór & Daniil Valme & Ádám Sleisz, 2024. "Current Challenges in Operation, Performance, and Maintenance of Photovoltaic Panels," Energies, MDPI, vol. 17(6), pages 1-22, March.
    23. Frondel, Manuel & Kaestner, Kathrin & Sommer, Stephan & Vance, Colin, 2022. "Photovoltaics and the solar rebound: Evidence for Germany," Ruhr Economic Papers 954, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    24. Gunkel, Philipp Andreas & Kachirayil, Febin & Bergaentzlé, Claire-Marie & McKenna, Russell & Keles, Dogan & Jacobsen, Henrik Klinge, 2023. "Uniform taxation of electricity: incentives for flexibility and cost redistribution among household categories," Energy Economics, Elsevier, vol. 127(PB).
    25. Ornella Tarola & Cecilia Vergari, 2024. "Endogenous subsidies for cleaner products: The role of ecofriendly consumers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 26(2), February.

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    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • 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
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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