Solar Rebound: The unintended consequences of subsidies

Many jurisdictions use net metering to record power exchanges between residential solar photovoltaic (PV) panels and the grid, thus valuing solar power at the electricity retail rate. However, if over the billing period, production exceeds consumption, the surplus remains freely available for consumption. In Wallonia (Belgium), the combination of net metering and generous subsidies for rooftop PV installation encouraged households to set-up large systems, possibly exceeding their consumption needs. We test this potential rebound effect with a large sample of residential PV installations. We observe that a large proportion of households oversize their installation to benefit from the subsidies and, later consume most of their excess production. The effect is econometrically highly significant. There is thus evidence of a strong increase in energy consumption by residential PV owners, which runs counter to the original policy design.