Diffusion of Environmentally-Friendly Energy Technologies: Buy vs. Lease Differences in Residential PV Markets

Abstract

Diffusion of microgeneration technologies, particularly rooftop photovoltaic (PV), represents a key option in reducing emissions in the residential sector. We use a uniquely rich dataset from the burgeoning residential PV market in Texas to study the nature of the consumer’s decision-making process in the adoption of these technologies. In particular, focusing on the financial metrics and the information decision makers use to base their decisions upon, we study how the leasing and buying models affect individual choices and, thereby, the adoption of capital-intensive energy technologies. Overall, our findings suggest that the leasing model more effectively addresses consumers’ informational requirements and, contrary to some other studies, that buyers and lessees of PV do not necessarily differ significantly along socio-demographic variables. Instead, we find that the leasing model has opened up the residential PV market to a new, and potentially very large, consumer segment — those with a tight cash flow situation.

Keywords: Residential Solar PV, Discount Rates, Solar Business Models, Individual Decision-making

JEL Classification: C81, D11, D12, D81, D83, D91, Q20, Q42