Newswise — Imagine a household that consumes 1,000 kilowatt hours of energy per month. They then install solar panels on their roof, which generate an average of 500 kilowatt hours of electricity per month. How much should their electricity consumption from the grid be reduced after installing solar? Five hundred kilowatt hours is the expectation, but in reality, it's less than that for most people. Now they consume more than 1000 kilowatt hours per month.
This paradox is called the solar feedback effect: the ratio of increased energy consumption to the amount produced by solar panels. In a new study by the Institute of Technology of Georgia, Matthew OliverAssociate Professor School of Economicsmade this argument about how the economics of solar energy actually work, “Tipping the Scale: Why Utility-Scale Solar Is Backing Away and What It Means for US Solar Policy“, he published The Electricity magazine.
“Having people adopt this technology reduces their dependence on conventional energy sources, but not in the way you might think,” Oliver said. “This is because people end up using electricity after getting solar panels as an economic and behavioral response.”
People may believe they are saving money because of subsidies, or they may perceive that their electricity use is not as harmful to the environment as it used to be – so they leave the lights on longer and the appliances running.
Oliver argues that policymakers should take solar payback into account when determining solar subsidies. Take the example of a typical family. If their solar return is 20%, they will eliminate the 20% carbon reduction benefit they should have received from adding the panels.
“You have to factor the estimated recovery effect into your benefit-cost ratio based on how much electricity you're replacing,” he said. “Because it doesn't happen on a one-to-one basis.”
If subsidizing residential solar isn't worth it, then shifting subsidies to utility-scale solar might be a good alternative. Although the effects of household solar feedback occur due to the behavior of individual users, this is not a problem with utility service providers. Utility-scale solar can achieve the full carbon reduction potential of solar.
“Policymakers could consider reallocating subsidies in a more optimal way to support greater investment in utility-scale solar,” Oliver said. “That's not to say that policy makers won't continue to subsidize residential solar, but there has been a lot of policy focus on solar adoption.”
Citation: Matthew E. Oliver, Tipping the Scale: Why Utility-Scale Solar Is Avoiding Sunrise and What It Means for US Solar Policy, The Electricity Journal, Volume 36, Issue 4, 2023.
The Georgia Institute of Technology, or Georgia Tech, is one of the leading public research universities in the US, developing leaders who advance technology and improve the human condition. The institution offers degrees in business, computing, design, engineering, liberal arts and sciences. Its more than 45,000 undergraduate and graduate students, representing all 50 states and more than 148 countries, study at the main campus in Atlanta, campuses in France and China, and through distance and online learning. As a leading technological university, Georgia Tech is an engine of economic development for Georgia, the Southeast, and the nation, conducting more than $1 billion in research annually for government, industry, and the community.