Item

Welfare and redistribution in residential electricity markets with solar power

Feger,Fabian
; 
Pavanini,Nicola
; 
Radulescu,Doina
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 incentivize 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 to 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 incentivize solar panel adoptions is more cost efficient and progressive across the income distribution, but generates a larger aggregate welfare loss.
Description
Publisher Copyright: © 2022 The Author(s). Published by Oxford University Press on behalf of The Review of Economic Studies Limited.
Date
2022-11
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Tilburg University Research Output Collection
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Keywords
D12 - Consumer Economics: Empirical Analysis, D31 - Personal Income, Wealth, and Their Distributions, L94 - Electric Utilities, L98 - Government Policy, Q42 - Alternative Energy Sources, Q52 - Pollution Control Adoption Costs ; Distributional Effects ; Employment Effects, SDG 1 - No Poverty, SDG 7 - Affordable and Clean Energy, SDG 10 - Reduced Inequalities
Citation
Feger, F, Pavanini, N & Radulescu, D 2022, 'Welfare and redistribution in residential electricity markets with solar power', Review of Economic Studies, vol. 89, no. 6, pp. 3267-3302. https://doi.org/10.1093/restud/rdac005
URI
https://hdl.handle.net/20.500.14602/75697
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