Brattle Economists Estimate Demand for Rooftop Solar in the US and the Impact of NEM

Brattle Principal Agustin J. Ros and Research Associate Sai Shetty have coauthored an article, “Residential Rooftop Solar Demand in the US and the Impact of Net Energy Metering and Electricity Prices,” which was recently published on SSRN.

Using a panel dataset of residential rooftop solar adoption for 27 states from 2008 to 2018, the authors estimated econometric demand models for rooftop solar and the impact of net energy metering (NEM) compensation during the period. Their research indicates that demand for rooftop solar is highly price elastic and that income is elastic as well. They find a large cross-price effect with respect to the residential electricity price indicating that rooftop solar is a strong substitute for utility-provided electricity-driven, in part, by poor residential rate design that primarily recovers fixed system costs through volumetric charges. With respect to NEM, they find it has a large positive impact on the demand for residential rooftop solar, resulting in at least a doubling of demand. Overall, the findings lend support to ongoing state policy efforts to reform net energy metering to improve electricity rate design.

The full article is available below.