Minimum prices and social interactions: Evidence from the German renewable energy program

Abstract

Minimum prices above the competitive level can lead to allocative inefficiencies. We investigate whether this effect is more pronounced when decision makers are influenced by their social environment. Using data of minimum prices for renewable energy production in Germany, we test if individual decisions to install photovoltaic systems are affected by the investment decisions of others in the area. We implement a propensity score matching routine on municipality level and estimate that existing panels in the municipality increase the probability and number of further installations considerably, even in areas with minimal solar radiation. Thus, social interaction can add secondary inefficiencies to the known allocative problems of minimum prices. The social interaction effect is stronger in areas with more solar radiation and less unemployment. A larger number of existing systems and more concentrated installations increase the social effect further.

Geographic network effects to engage people in the energy transition: The case of PV in Switzerland

“…A total of 40.4% of respondents know at least one person in their personal network who has already installed photovoltaic panels. These findings are in line with many previous studies that looked at the influence of spatially close surrounding installations on the adoption of PV in Switzerland [ 23 , 30 ] in other parts of Europe [ 58 ] and the US [ 29 , [31] , [32] , [33] ].…”

Norms, prices, and commitment: A comprehensive overview of field experiments in the energy domain and treatment effect moderators

“…No differences in treatment effects related to the political ideology of the intervention's targets were, however, found in Gillingham and Tsvetanov ( 2018 ). Using municipality-level data from Germany, Inhoffen et al ( 2019 ) detected weaker peer effects on solar panel installations in municipalities with larger Green party vote shares (however, this result should be interpreted as suggestive, due to the spatial data aggregation).…”

The influence of subjective norms on the use of heat pumps in achieving sustainable development

“…This is partially in line with Irfan, Elavarasan, Hao, Feng & Sailan (2021), who state that it is noticeable that environmental pressure has an insignificant effect on the intention to use solar energy. In contrast, the obtained results are not in agreement with the researches of Li et al (2019) who indicate that the influence of subjective norms on the intention to purchase energy-efficient devices is not significant, and Lundheim, Vesely, Nayum, & Klöckner (2020) that subjective norms do not have a significant influence O N L I N E F I R S T on the use of solar panels, nor with the aforementioned researches which confirm the importance of subjective norms (Sun et al (2018); Wang et al (2014); Gadenne et al (2011);Thøgersen & Grønhøj (2010); Nakamura (2016); Inhoffen et al (2018)).…”

“…Analyzing one of the largest subsidized renewable energy support programs in the European Union for the installation of photovoltaic systems in Germany, Inhoffen et al (2018) state that in municipalities with more solar radiation and less unemployment, social interaction has a stronger effect, which affects the probability of increasing the number of new installation up to 50%. On the other hand, in the northern areas of the country, with minimal solar potential, the positive influence of environmental pressure was confirmed.…”