How cost-effective were subsidies for solar energy in Germany?

Jakob von Ditfurth and Sebastian Rausch

No 25-018, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We study Germany's photovoltaic (PV) subsidy program, estimating a dynamic model of new technology adoption which accounts for heterogeneity in residential ownership structures. We find that homeowner and landlord investors heavily discount future benefits, highlighting the suboptimality of the feed-in tariff structure and the inefficient use of government funds. The high administrative costs associated with tenant electricity contracts strongly discourage landlords from investing in new energy technologies. Our analysis suggests that policy design should prioritize upfront investment subsidies over feed-in tariffs to promote renewable energy adoption. Reducing administrative costs associated with tenant electricity programs is key to unlock investments by landlords and expand tenants' access to solar energy, thereby enhancing cost-effectiveness.

Keywords: Renewable Energy; Subsidies; Germany; Households; Undervaluation; Cost-Effectiveness (search for similar items in EconPapers)
JEL-codes: C51 D15 Q48 Q58 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:319889

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