Welfare and Redistribution in Residential Electricity Markets with Solar Power

Nicola Pavanini, Fabian Feger and Doina Radulescu

No 12517, CEPR Discussion Papers from Centre for Economic Policy Research

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.

JEL-codes: D12 D31 L94 L98 Q42 Q52 (search for similar items in EconPapers)
Date: 2017-12
New Economics Papers: this item is included in nep-ene and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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