Welfare and Redistribution in Residential Electricity Markets with Solar Power

Abstract

An increasing number of households installing solar panels and consuming the energy thus produced raises two challenges for regulators: network financing and vertical equity. We propose alternative tariff and subsidy designs for policymakers to incentivise solar panel adoptions and guarantee that network costs are recovered, while trading off efficiency, equity, and welfare motives. We estimate a structural model of energy demand and solar panel adoption, using a unique matched dataset on energy consumption, prices, income, wealth, solar panel installations, and building characteristics for 165,000 households in Switzerland from 2008-2014. Our counterfactuals recommend the optimal solar panel installation cost subsidies and two-part energy tariffs to achieve a solar energy target. We show that, relative to installation cost subsidies, relying on marginal prices to incentivise solar panel adoptions is more cost efficient and progressive across the income distribution, but generates a larger aggregate welfare loss.

The Political Economy of Financing Climate Policy -- Evidence from the Solar Pv Subsidy Programs

“…The generous subsidy programs were implemented by the government during the legislature of 2004-2009. 21 The government acting during the 2009-2014 legislature had to adapt and later suppress the GC mechanism. During this term, it became apparent that, on the one hand, the investors benefited from a high return and, on the other hand, the mechanism was costly and that these costs would be passed through to consumers.…”

Environmental, Redistributive and Revenue Effects of Policies Promoting Fuel Efficient and Electric Vehicles

“…Borenstein & Davis (2016) nd that 90% of vehicle income tax credits were granted to the highest income quintile, while Durrmeyer (2021) nds that middle income households bene t the most from the French feebate policy. ese papers are part of a broader and growing literature analysing distributional consequences of environmental policies (Bento 2013) in various elds such as carbon pricing in general (Ohlendorf, Jakob, Minx, Schröder, & Steckel 2021), electricity markets (Reguant 2019), private photovoltaic (Feger, Pavanini, & Radulescu 2022) and water conservation (Wolak 2016).…”

Weighting the Waiting: Intertemporal Social Preferences

“…Bütikofer and Salvanes) and investments in solar panels (e.g. Feger et al 2021). Another example concerns day-to-day planning, such as choosing whether to give priority to individual or team work.…”