As an undergraduate at the University of Pennsylvania, Daniel Matisoff was intrigued by the ability of economic markets to help solve environmental problems. “Learning about the regulatory role of governments in cap-and-trade markets for reducing carbon emissions shaped my career path,” says Matisoff, a professor at the Jimmy and Rosalynn Carter School of Public Policy and EPIcenter faculty affiliate. “It helped me decide to enter academia after earning my PhD in public policy at Indiana University, where I compared voluntary and mandatory emission reduction policies.”

Today, Matisoff continues research activities in this space and also directs a professional master’s program whose graduates help implement environmental policies in the public and private sector. Soon after joining the Georgia Tech faculty in 2009, he began to focus on market transformation through regulation, government subsidies and other financial incentives. 

This led to an award-winning 2023 book about the Leadership in Energy and Environmental Design (LEED) certification program. It sparked the construction industry’s green building movement and incentivized early adopters of sustainable technology to create new supply chains. For Matisoff, LEED is a perfect example of using governance as a lever for environmental change. 

“After studying the drivers of new technology for green buildings, some of our recent work has focused on testing if the adoption of renewable technology in the electricity market has affected consumer behavior,” says Matisoff. “That knowledge can help decide what rates people should pay for clean electricity.”

In many U.S. states, those rates are set by net metering policies: Homeowners with rooftop photovoltaic (PV) panels receive credit on their monthly electricity bills for the electricity they feed into the grid. Since that credit is based on retail rather than wholesale prices, net metering is an implicit subsidy for solar panels. Without changes in energy consumption pre- and post-installation, newly generated solar power replaces grid electricity one-to-one, and homeowners eventually recover the cost of their panel installation through lower monthly bills. 

But Matisoff and his team—economics professor and EPIcenter faculty affiliate Matthew Oliver and former PhD student Ross Beppler—were curious if the adoption of solar technology actually changed consumer behavior. To answer that question, the researchers analyzed 15 million monthly electricity bills of more than 300,000 homes in Washington, D.C., and 13 eastern states served by the same electric utility. 

Between December 2010 and June 2018, about 8,000 households installed solar panels, for an average annual adoption rate of 2%. To compare two groups of households whose only difference was the panel installation, the team selected a set of non-adopters whose electricity usage patterns were similar to adopters. 

The analysis showed that solar adopters consumed an extra 157 kWh/month of electricity after their panels were producing an average of 550 kWh/month. Thus, almost one-third (28.5%) of the newly generated electricity went toward new consumption instead of replacing grid electricity. This so-called “rebound effect” has also been reported in energy efficiency analyses of water heaters, air conditioners and other appliances: Once they are cheaper to run, people tend to use them more often. 

Without other household-level data, the researchers could not distinguish between three possible reasons for the solar rebound effect: a “moral license” to consume more clean energy due to less guilt about using dirty grid electricity; mentally ignoring the installation costs and spending the same dollar amount on monthly electricity bills; or other household changes that caused higher usage and coincided with the panel installation, such as purchasing an induction stove, heat pump or electric vehicle. 

Although the rebound effect reduces environmental benefits, financial incentives for early solar adopters play a similar role as in the LEED example, says Matisoff. “They prime the market and create ‘positive externalities’ by reducing the transaction costs for later adopters,” he explains. “But decisions about subsidies should also consider that many early adopters are wealthier homeowners who may have installed the panels anyway.” 

As a natural next project, Matisoff and his colleague studied community solar programs designed to make solar power accessible to non-homeowners. Details vary, but these programs are now available in most states and have better economies of scale than rooftop panels. 

The researchers obtained 2015-2023 billing data from an electricity co-op serving eight rural and suburban counties west of metropolitan Atlanta. This included 754 program participants who had chosen to pay a fixed monthly cost ($22-25) per panel block in a co-op-owned solar farm located elsewhere. The utility deducted from the participants’ consumption the amount of electricity generated by the purchased blocks, which varied by month. The researchers compared that billing data to 2,700 non-participating households with similar pre-enrollment consumption features. 

In contrast to the rooftop solar study, program enrollment did not change the amount of consumed electricity. The fact that monthly bills were 3-4% higher for participants, however, highlights the importance of providing targeted subsidies for low-income households. 

One of the biggest challenges of the 21st century, says Matisoff, is to provide an ever-growing amount of clean energy for homes, businesses and data centers. “That includes deciding how we generate and move around that energy and how we make it affordable for everyone,” he adds. “To meet that challenge, it is important to educate the next generation of policymakers and promote interactions between researchers and industry partners so that we understand the pros and cons of different policies before we implement them.”