Working Paper: NBER ID: w21342
Authors: Severin Borenstein
Abstract: With dramatic declines in the cost of solar PV technology over the last 5 years, the electricity industry is in the midst of discussions about whether to use this low-polluting renewable energy source in grid-scale generation or in distributed generation (DG), mostly with rooftop solar PV. California has led the growth in DG solar in the U.S. I use 2007 to early 2014 residential data from Pacific Gas & Electric β the utility with largest number of residential solar customers in the U.S. β to examine the full range of private incentives for installing residential solar, from the direct payments and tax credits to the indirect incentives that result from the residential tariff design and the crediting of solar production under βnet energy metering.β I then study the income distribution of solar adopters and how that has changed over time. I find the skew to wealthy households adopting solar is still significant, but has lessened since 2011. Adoption continues to be dominated by the heaviest electricity-consuming households, probably because the steeply-tiered tariff structure greatly increases the private value of solar to such customers while reducing the incentive for consumers who are below median consumption. In fact, the financial incentive for those who adopt solar over the sample period may have been due nearly as much to California's tiered tariff structure as to the 30% federal tax credit. The California experience suggests that rate design can greatly influence the economic incentives for residential solar adoption and which customers receive those benefits.
Keywords: Residential Solar PV; Electricity Tariffs; Tax Incentives; Rebates
JEL Codes: L94; Q42; Q52; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tiered pricing structure of residential electricity tariffs (L97) | private value of solar PV for high-usage households (L97) |
| private value of solar PV for high-usage households (L97) | adoption of solar PV systems (Q48) |
| California Solar Initiative (CSI) rebates (Q48) | adoption of solar PV systems (Q48) |
| federal tax credit (H20) | adoption of solar PV systems (Q48) |
| income distribution of solar adopters (D39) | dynamics of solar adoption (C69) |
| lower-income customers (D16) | system size relative to consumption (E20) |
| lower-income households (R20) | likelihood of utilizing third-party ownership arrangements (L24) |