The "solar rebound effect" is a phenomenon where households with residential solar photovoltaic (PV) systems end up consuming more electricity in response to greater solar energy generation. This outcome arises because the cost savings from generating their own electricity lead to increased usage. A recent study by Matthew E. Oliver from the Georgia Institute of Technology and his co-authors, Juan Moreno-Cruz from the University of Waterloo and Kenneth Gillingham from Yale University, delves into this effect, providing crucial insights for policymakers and researchers.

The study, titled "Microeconomics of the Solar Rebound under Net Metering," explores how different net metering policies influence the solar rebound effect. Net metering allows households to sell excess electricity generated by their solar panels back to the grid, often at the retail rate. This policy makes solar PV systems more financially attractive but also impacts household behavior.

The authors developed a theoretical framework to understand the solar rebound. They found that under classic net metering, the rebound is primarily an income effect. Households feel wealthier due to the savings on their electricity bills and thus consume more electricity. However, under net billing, where excess electricity is compensated at a lower rate, a substitution effect also comes into play. This means households might change their consumption patterns based on the relative costs of electricity from the grid versus their solar panels.

The study also incorporates behavioral economics concepts like moral licensing and warm glow effects. Moral licensing occurs when people justify increased consumption because they feel they are already doing something good, like generating green energy. Warm glow refers to the positive feelings from contributing to environmental sustainability, which can either increase or decrease consumption depending on the household's values.

One of the key takeaways from the study is the importance of the regulatory environment. Policymakers need to carefully design net metering policies to balance promoting solar adoption while accounting for the possibility that rebound effects may offset the desired outcomes of grid resilience and reduced greenhouse gas emissions. For instance, switching from net metering to net billing might reduce the rebound effect, leading to better environmental outcomes.

The welfare analysis conducted by the authors shows that the solar rebound's impact on social welfare depends on various factors, including the cleanliness of the electricity grid and the external costs of electricity production. In cleaner grids, the rebound might be less detrimental, while in grids reliant on fossil fuels, it could negate some of the environmental benefits of solar adoption.

This research underscores the complexity of energy policy and the need for nuanced approaches that consider both economic and behavioral factors. By understanding the solar rebound effect, stakeholders can make more informed decisions to promote sustainable energy use.

For more detailed insights, you can explore the full study by Matthew E. Oliver and his co-authors. Their work provides a robust foundation for future empirical research and policy development in the field of renewable energy.

This article was written with the assistance of Microsoft Copilot (Jan. 27, 2025) and edited by Georgia Tech EPIcenter's Gilbert X. Gonzalez and Matthew E. Oliver.