1 October – Electricity Consumption Rebound Effects of Residential Solar Panel Adopters

Date: 1 October 2018
Time: 12:00pm
Location: Baker Hall 129, Conference Room
Speaker: Lucy Qiu
Topic: Electricity consumption rebound effects of residential solar panel adopters

Abstract: Customers who have adopted solar panels can reduce their energy bills and thus lower the effective average electricity prices they pay. When price falls, a solar consumer might consume more electricity than before – so-called rebound effects. We provide the first empirical evidence of solar panel rebound effects in electricity consumption. We use household level hourly and daily electricity meter data as well as hourly solar panel electricity generation data from 277 solar homes and about 4000 non-solar homes from 2013-2017 in Phoenix metropolitan area of Arizona. We rely on matching method and fixed effects panel regression to control for potential endogeneity issues of solar adoption. Results show that on average, when solar electricity generation increases by 1kWh, solar homes increase their total electricity consumption by 0.18kWh. We show both theoretically and empirically that this response to solar electricity generation should be equal to price elasticity of electricity consumption. At the average values of pre-solar electricity consumption and solar generation, rebound effects are estimated at 13% – 14%. We also find that consumers located in more liberal neighborhoods experience lower rebound effects, suggesting that environmental awareness plays a role. Building upon our theoretical framework, we estimate that the increase in consumer surplus from solar panel adoption is on average $1179/yr, which leads to a simple payback period of 29 years.