Power From the People: Rooftop Solar and a Downward-Sloping Supply of Electricity

Abstract

Using high-frequency data, I show that the supply of electricity by solar households can be downward-sloping. I document that households receiving higher prices to sell electricity increase their own consumption as their panels produce more, relative to households receiving lower prices. I test several competing explanations and show that a dollar of electricity income increases electricity expenditures by 23 cents, an effect much larger than a standard income response. The fact that solar households treat income from electricity production as "electricity money" means that production subsidies may decrease the supply of electricity by solar homes.

Keywords: Rooftop Solar, Fungibility, Mental Accounting, Distributed Generation

JEL Classification: D12, Q41, Q42