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The price of risk in residential solar PV investment
Type
applied research project
Start Date
01 October 2018
End Date
30 June 2019
Status
ongoing
Keywords
solar PV
investment
risk
households
prosumers
energy policy
Description
This project explores how perceived investment risk influences solar photovoltaic (PV) investment decisions by households. The role of risk is still relatively unexplored in the literature but has become very relevant, not just in Switzerland, but all over Europe, due to the phasing out of policies that provide solar investors with a stable revenue stream (e.g. feed-in tariffs) and introduction of alternative support schemes (e.g. investment grants) that imply that some investment risk is borne by residential solar producers. We aim to contribute to this policy debate by investigating the role of households’ risk and time preferences in solar investment decisions.
We collect empirical evidence for this analysis through semi-structured interviews with Swiss households who adopted solar and solar PV installers, as well as through a large scale online survey submitted to a sample of Swiss single- and multifamily-house owners who do not own a solar PV system yet but are interested in purchasing one for their house in the next 5 years.
We collect empirical evidence for this analysis through semi-structured interviews with Swiss households who adopted solar and solar PV installers, as well as through a large scale online survey submitted to a sample of Swiss single- and multifamily-house owners who do not own a solar PV system yet but are interested in purchasing one for their house in the next 5 years.
Leader contributor(s)
Partner(s)
Haute Ecole de Gestion (HEG) Genève
SFOE
Funder(s)
Method(s)
discrete choice experiment survey
Range
Institute/School
Range (De)
Institut/School
Division(s)
Eprints ID
247711
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PublicationThe price of risk in residential solar investmentsHouseholds are key actors in decarbonizing our economy, especially when it comes to investments in a decentralized energy system, such as solar photovoltaics (PV). The phasing-out of feed-in tariffs, and unexpected policy changes in the wake of an increasingly polarized climate debate, require residential PV investors to bear new risks. Conducting a discrete choice experiment coupled with a randomized informational treatment among potential residential solar investors in Switzerland, we test whether policy and market risks deter households from investing in solar. We find that salient policy risk reduces households' intention to invest in solar, especially for risk-averse individuals. Conversely, households seem less sensitive to market risk: residential solar investors accept volatile revenues, as long as a price floor for excess electricity sold to the grid is guaranteed. Our study suggests that keeping perceived policy uncertainty low is more important for residential solar investors than fully hedging against electricity market risk.Type: journal articleJournal: Ecological EconomicsVolume: 180Issue: 106856