How Do Residential Greenhouse Gas Mitigation Technologies Affect Electricity Prices and Consumer Welfare?

Zeyang Dong, Jing Liang, Joshua Linn and Yueming Qiu
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Joshua Linn: Resources for the Future

No 25-28, RFF Working Paper Series from Resources for the Future

Abstract: Many jurisdictions encourage households to adopt technologies that reduce greenhouse gas emissions and energy consumption, but there is little evidence on how these technologies affect the welfare of nonadopting households. We show that, in theory, adopting climate-friendly technologies that affect aggregate electricity demand, such as rooftop solar photovoltaics or electric vehicles, can increase or decrease average retail electricity prices in the short run; if the variable cost curve for electricity generation is sufficiently flat, higher demand reduces prices (and vice versa). Analysis of US residential electricity price and consumption data, as well as simulations of a computational electricity generation model, suggests that this variable cost condition holds. Adopting technologies that reduce consumption raises average retail prices, harming nonadopters; adopting technologies that increase electricity demand reduces average electricity prices, benefiting nonadopters. Using household survey data, we find that adopting rooftop solar disproportionately harms low-income nonadopting households, whereas adopting electric vehicles disproportionately benefits them. This progressivity roughly offsets the regressivity of the electric vehicle subsidy transfers.

Date: 2025-11-12
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-res
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